“A Study Of Outsourcing in Banking Sector Of India”

A Synopsis submitted to SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS,

MUMBAI

For the degree of Bachelors in Banking and Insurance

Submitted by:

Susrita Sonit Sarkar

Seat no. – 3184340

Submitted to:

Dr. Anil R. Chougule

M.A., NET, M.Phil. Ph.D.

Assistant professor,

Dept. of Economics

Sydenham College of Commerce and Economics, Mumbai

INTRODUCTION:-

Outsourcing in Banking Sector -

Outsourcing is the use of a third-party vendor to perform activities on a continuing basis that
would normally be undertaken by the bank. The third party could be an affiliated entity
within the bank's corporate group or an entity external to the bank's corporate group. Banks
outsource to take advantage of many different benefits. By outsourcing through experienced
service providers, a bank can quickly improve the quality of its services, increase its
operational or financial efficiencies, and, in many cases, reduce costs. Outsourcing may also
allow bank management to increase its focus on the core business functions, expand the
availability of bank services, and accelerate the delivery of such services.

Banks all over the world have developed along a series of vertically integrated ‘silos’ and the
result are extensive duplication and redundancy across both businesses and geographies.
Duplicated structures and inflexible technology/service solutions not only generate increased
costs but also reduce business flexibility and damage service quality through inconsistency.

Since the 1990s, banks have been improving their efficiency ratios by acquiring or upgrading
technology, cost cutting and consolidation. But now that further improvements are proving
elusive, costs have been trimmed to the minimum and consolidation gains have waned, banks
are under pressure to improve earnings. Outsourcing has thus becomes a way of moving
banks’ scarce resources away from trivial operations to value-added services, such as
business strategy and execution, new opportunity identification and pricing, business results
and interpretation, and M&A planning.

The Indian banking industry is witnessing robust growth under the influence of a changing
regulatory environment, rapid technological advancements, heightened competition and
consolidation. This changing landscape in the banking industry is driving banks to explore
the outsourcing option to achieve efficiencies.

Apart from the growth in the industry, centralization and penetration of IT systems, need to
focus on core services, rapid scale up and introduction of new services are driving
outsourcing in this industry.
Outsourcing revenues from the Indian banking industry are estimated at Rs. 4 b for FY08 and
are expected to grow at a CAGR of 47% to touch Rs. 19 b by FY12. According to Arun
Jethmalani, CEO, ValueNotes, “The outsourcing potential in the Indian banking industry will
increase rapidly as banks strengthen their IT systems. Large international BPOs with their
experience of serving global banks and an end-to-end services portfolio are better poised to
capture this market in the long term.”
SIGNIFICANCE OF STUDY:-

The Significance of the study is to highlight why a company and bank may choose to
outsource certain business functions. Some of the most common reasons include is If one
doesn’t have the time, money or skill to do the job internally, or if there is a function that is a
burden or detrimentally affecting other parts of the business, outsourcing is worth
considering. When companies first started thinking about outsourcing non-strategic functions,
such as payroll, IT maintenance, facilities management and logistics, their goal was to reduce
costs. Today, however, there is a far wider range of reasons why these organizations regularly
contemplate outsourcing core operations to third-party specialists, which include the
following:

 Improving operational performance.

 Avoiding capital expenditure.
 Reducing overheads and operating costs.
 Saving manpower and training costs.
 Improving speed, service and efficiency.
 Freeing up resources thereby enabling more time to focus scarce resources on time-
critical projects, such as application re-engineering.
 Transferring non-core functions.
 Access to specialized skills.
 Avoiding the cost of ‘chasing technology’.
 Leveraging the provider’s extensive investment in technology and methodologies to
reduce the risk of technology obsolescence.
 Increased efficiency by consolidating and centralizing functions.
RATIONALE BEHIND SELECTING THE TOPIC:-

The Purpose behind selecting this topic is, as outsourcing has been a long practice for most
companies, but the onset of the Internet has allowed it to bloom and become bigger as the
years go by.

Here are some reasons why outsourcing is a good thing to study.

1. Cost-effective

During the last couple of years, the outsourcing industry is consistently surprising those who
work in Wall Street. Outsourcing firms like Tata, Wipro, and Infosys all went above and
beyond their expected earnings. IT firms usually benefit from the outsourcing set-up due to
the reduced nature of the costs that are required.

3. A Change in Operations

Change is always a good thing and for companies who spend too much time doing a certain
task that isn’t at all important. Outsourcing is a great option for them to make the work
process easier to handle. Those working in a local company may choose to outsource work so
that they can continue to focus on the core business processes. Small tasks can be easily
passed on to outsourcing companies.

OBJECTIVE OF STUDY:-

 To study how Reducing and controlling operating costs works(the largest driver)
 To study how to Improve companies focus
 To study the Gaining access to world-class capabilities
 To study Freeing internal resources for other purposes
 To study Streamlining or increasing efficiency for time-consuming functions 
 To study Maximizing use of external resources
 To study Sharing risks with a partner company
 To study Clarity concerning company goals and objectives
 To study A strategic vision and plan
 To study the Vendor selection
 To study Relationship management
 To study Properly structured subcontract and vendor agreements
 To study Open communication with stakeholders
 To study Senior leadership support and involvement
 To study Careful attention to personnel issues
  To study Short-term financial justification

RESEARCH METHEDOLOGY:-

The data for this research will be collected by using both the methods of data collection, i.e.
primary and secondary to analyse and further evaluate the outcomes.

 PRIMARY DATA:-
The primary data will be collected through questionnaires which will be circulated within
a sample size of 50 Respondents who will be randomly selected.

 SECONDARY DATA:-
On the other hand secondary data will be collected through various published books,
newspapers, magazines, articles and journals.

TECHNIQUE OF ANALYSIS:-

The data collected by primary research will be analysed using descriptive and inferential
analysis method under statistical analysis along with predictive analysis and presented in text,
tabular and graphical format for easier comprehension and interpretation.

SAMPLE SIZE:-

50 Random respondents residing in Mumbai city will be selected for the research process.
SCOPE & LIMITATIONS:-

 The survey is limited to Mumbai city

 The sample size is limited to 50 respondents with a universe size of 100

REVIEW OF LITERATURE:-

Maurice F. Greaver (1999)1

Strategic Outsourcing: A Structured Approach to Outsourcing Decisions

and Initiatives:

To ensure success, outsourcing must be a strategic decision - not a mere life preserver or
short-term revenue-booster. Strategic Outsourcing is a complete, definitive guide to both the
immediate tactical issues and the long-term strategic objectives. With tools for measuring
benefits and risks, guidelines for implementing the process, and tips for helping employees
make the transition, the book gives you everything you need to effectively outsource any
activity, function, or process in your organization.

Mark J. Power, Kevin C. Desouza, Carlo Bonifazi (2006)2

The Outsourcing Handbook: How to Implement a Successful Outsourcing

Process:

Outsourcing is now increasingly used as a competitive weapon in today's global economy.

The Outsourcing Handbook is a step-by-step guide to the whole outsourcing process. It looks
at key factors in the success of a project as well as problem areas and potential pitfalls. It
provides an objective, repeatable process that allows organizations to maximize returns on
outsourcing investments. Unlike most outsourcing books, The Outsourcing Handbook takes a
process-oriented, actionable, and structured approach to understanding the intricacies of
constructing, managing, and even terminating an outsourcing engagement.
Carrie Dresden (2016)3

Outsourcing: Reduce Costs and Improve Efficiency by Following These

Incredible Outsourcing Strategies (outsourcing, it outsourcing, strategic
outsourcing)

Outsourcing is a trendy alternative that is at everyone’s disposal nowadays. Working on the

Internet is compatible with many businesses and provides countless advantages. You will
gain visibility, save money and reach a wider public, what else would you want in exchange
of a zero inversion? Actually, you may save time by reducing commuting displacements to
some extent.

Offshore experts work every day in their specific sector; they are highly experienced in the
service they provide. Moreover, freelancers provide highly valuable content for a reduced
price in comparison to your regular alternatives in your town. If you only need a temporary
expert to deal with certain issues, outsourcing is likely the best way to proceed.

In this book, we will review the basic alternatives to implement outsourcing techniques to
your business. Read carefully yo discover how to profit from the endless possibilities of this
resource.

Oakie D. Williams (1998)4

Outsourcing: A Cio's Perspective

This book identifies key elements that can be used to assess the feasibility of securing a
successful, profitable, and manageable outsourcing agreement. It provides a convincing case
that even if the final decision is not to outsource, the result of the process will identify
potential business improvement opportunities.

Greenaven Press (2013)5

Outsourcing
Each title in the highly acclaimed Opposing Viewpoints series explores a specific issue by
placing expert opinions in a unique pro/con format; the viewpoints are selected from a wide
range of highly respected and often hard-to-find publications.; This title explores numerous
aspects of outsourcing, including the global impact of outsourcing; if outsourcing is good for
business; the impact outsourcing has had on the US economy; and how the government
should regulate outsourcing.; "Each volume in the Opposing Viewpoints Series could serve
as a model not only providing access to a wide diversity of opinions, but also stimulating
readers to do further research for group discussion and individual interest.

REFERENCES:-

1. Maurice F. Greaver (1999)1

Strategic Outsourcing: A Structured Approach to Outsourcing Decisions and Initiatives

https://www.goodreads.com/book/show/2999208-strategic-outsourcing?
ac=1&from_search=true&qid=BR52FtB5Zp&rank=1

2. Mark J. Power, Kevin C. Desouza, Carlo Bonifazi (2006)2

The Outsourcing Handbook: How to Implement a Successful Outsourcing Process

https://www.goodreads.com/book/show/1044839.The_Outsourcing_Handbook?
ac=1&from_search=true&qid=wWfxE0lEzx&rank=1

3. Carrie Dresden (2016)3

Outsourcing: Reduce Costs and Improve Efficiency by Following These Incredible

Outsourcing Strategies (outsourcing, it outsourcing, strategic outsourcing)

https://www.goodreads.com/book/show/31449365-outsourcing?
ac=1&from_search=true&qid=WzxNMbY9st&rank=1

4. Oakie D. Williams (1998)4

Outsourcing: A Cio's Perspective

https://www.goodreads.com/book/show/3352139-outsourcing?
from_search=true&qid=HRKXcsZzGC&rank=16
 5. Greenaven Press (2013)5

Outsourcing

https://www.goodreads.com/book/show/17810846-outsourcing?
from_search=true&qid=HRKXcsZzGC&rank=11

CHAPTERS SCHEME:-
Tentative Chapters Scheme are as follows:

Chapters Particulars

I Introduction and Research Design

II Theories on Outsourcing in Banking and Financial sector

III Determinants and impact of Outsourcing in Banking and Financial sector

IV Data analysis & Interpretation

V Observations, Conclusion and Suggestions

Submitted by:- Submitted to:-

Susrita Sonit Sarkar Dr. Anil R. Chougule

Seat no.- 3184340 Project Guide

Bachelors in Banking and Insurance