Sub-prime credit card crisis may hit Indian BPOs

By siliconindia   |   Friday, 18 January 2008, 01:40 IST
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New Delhi: After the sub-prime mortgage crisis of 2007, it's now the possible sub-prime credit card mess in the U.S. is all going to affect the Indian Business Process Outsourcing (BPO) industry in 2008, reported the Economic Times (ET). A credit crunch in financial markets and downfall in the U.S. real estate prices is leading to lesser liquidity and a higher rate of delinquencies on credit cards in the U.S. More defaults attached with severe lending may well lead a slowdown in credit card sales thus hurting the BPO balance sheets. Companies like WNS Global Services, Infosys BPO, and EXL Service were affected by the 2007 mortgage crises. The impact of the 2007 was comparatively low but a slowdown in card sales or bankruptcies of financial institutes selling credit cards in the U.S. may give a bigger shock to Indian BPOs this year. In the long run large number of delinquencies of banks selling credit cards, be it prime or subprime, may lead to more offshoring of debt collection processes meanwhile an imminent sub-prime credit card crises may lead to a large impact spread over 4-5 months on Indian BPO industry. "If a meltdown in the sub-prime credit card business happens in 2008, Indian BPOs will surely be hit. We do not do any credit card processing but it forms a major potion of financial servicing offshoring business to India," says Sanjiv Kapur, Senior VP and Head-BPO at Patni. Major banks oustource their credit card business to India, which includes customer service, sales, collections and application processing. Citigroup, Merrill Lynch, Goldman Sachs, Barclays Capital, HSBC, JP Morgan Chase, Morgan Stanley, Lehman Brothers are some of them. These financial institutes have witnessed billions of dollars in losses in the past few months due to the sub-prime mortgage crises.