UK regulatory bodies inspect Indian BPOs

By agencies   |   Tuesday, 22 August 2006, 07:00 Hrs
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MUMBAI: To guard against risks posed by offshore outsourcing, Financial Services Authority (FSA) and Bank of England (BoE) are carrying out regular inspection of Indian BPO firms.

The inspection follows reports of the U.S. regulatory body, Office of the Comptroller of Currency (OCC)’s plans to undertake a similar inspection of Indian BPOs. While the FSA plays the regulator’s role in the UK, BoE is responsible for financial stability of its banks.

Though the FSA report has termed offshoring as “not inherently more risky than outsourcing domestically provided that there is suitable risk monitoring”, officials who attended a meeting with FSA three weeks ago have stated that the agency has voiced its concern over the lack of law enforcement in India.

FSA’s report on the BPO operations of Indian institutions lists out two major concerns: high attrition and business continuity plans. FSA, however, acknowledges that both these risks have been so far well handled by Indian vendors. BPO industry’s opinion is currently divided over the medium and long-term impact of new compliance issues being raised by foreign regulatory bodies. While Sunil Mehta, vice president, Nasscom feels that inspection by foreign regulators like OCC, FSA and BoE will raise compliance standards and credibility of Indian BPOs, several others argue that specific regulations that might be an outcome of such inspections might burden the sector as they will give the regulators the right not only to inspect but also to audit the operations.

Though firms like Ernst & Young, KPMG offer specific services to Indian BPO firms to make sure they comply with these regulators, meeting some of the conditions laid down by them can raise costs for mid-sized Indian BPO firms, thus eroding the cost advantage they enjoy. This will eventually make it difficult for them to attract business from overseas clients.

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