First Financial to set up captive unit in India

MUMBAI: Nothwithstanding all the negative publicity surrounding captive operations, First Financial Bank, one of the six oldest banks in the United States, is learnt to be setting up a captive operation in India. The captive is likely to have a capacity of 1,000 people and have both IT and BPO functions, sources familiar with the development told ET.

The captive will be located at Bangalore, where a large of number of financial services BPOs such as HSBC and Goldman Sachs are already located. “It will also have call centre operations,” the source said.

Recently, Barclays Bank Plc also announced its intention to set up a captive in India. Until now, the firm was a 50% owner in BPO firm, Intelenet. “The bank was keen on offshoring a larger amount of work to India. So it wanted to set up a captive,” said an executive connected with the deal. The BPO will come up in the National Capital Region and is expected to run processes that are not already being outsourced to Intelenet. The BPO captive will be set up by the Intelenet management for the bank.

The news of the stake sale in Citigroup’s captive operations had sparked off rumours about a sell-off by many captives in the country and about the unviability of these operations because of high attrition and insufficient management bandwidth. Before Citigroup, Genpact had sold off 60% stake in its captive operations to PE firms, General Atlantic Partners and Oak Hill Capital Partners.

However, Gartner, regional research director for India, said, “It is not the death of the captive phenomenon. It is going to expand this year as well. What is going to change is that the multinationals will realise they more of pre-planning before setting up a captive. It will not work if its 100-150 people operation.”

Another research firm, Forrester, had put out a report last month stating that 60% of captives in the country were not healthy. And analyst Sudin Apte who authored the reported was quoted as saying, at least 40-60% of the current captives would have embarked on some exit strategies, with the number of new centres being set up tapering off gradually the next year. However, Mr Iyengar refuted this saying more captives would be set up and that financial services would lead the charge, and players from retail and auto would also be there.