The ills of a slowdown in the US economy are gathering pace in India. Almost seven months after the first ripples of the US sub-prime shakeout hit the Indian shores with Lehman Brothers shutting down its mortgage capital division in Mumbai, global financial powerhouses operating from the country are seen reducing their employee headcounts.
While Merrill Lynch, the third largest US investment bank that announced a $5.7 billion bad debt write-down earlier this week, is learnt to have cut 45 jobs in India citing substandard performance of employees, JP Morgan Chase, the second largest US bank in terms of assets, has trimmed its Indian workforce by 10. Sources close to the development said that Merrill Lynch has dismissed 28 people in Mumbai and 17 in their Chennai office.
However, when contacted, the Merrill Lynch spokesperson said, “We continue to grow our footprint in India by leveraging the talent pool available here.”
An e-mailed query to JP Morgan remained unanswered.
In January 19, 2008 edition, Hindustan Times had reported that Lehman is shutting down its mortgage capital division in India, where it employs over 100 people.
Though financial powerhouses maintain that they are in an expansion mode in India, recent developments smack off worse times to come. For instance, Merrill Lynch was apparently forced to finance a major part of its $30.6 billion sale of collataralised debt obligations, hinting of growing pessimism in the US mortgage market.
Several major US banks have already stopped recruitments in India and a few of them have put on hold their expansion plans. Lehman Brothers has already stopped recruitment in India for back office operations. It has decided to put on hold its plans to set up a back office operation centre in Delhi.
The Delhi facility, which was originally designed as a back office support centre for market-related investment services, was scheduled to open in the last week of this month. JP Morgan has shut down their equity research facility in India. Now, the entire research is being coordinated from Hong Kong, sources said.
There were no recruitments for JP Morgan in the last three-four months, he said.
Meanwhile, the market grapevine is that Citi Group is in the process of selling its Indian back office operations, where it employs over 5,000 people.
About 30 per cent of the world’s back-end operations are done from India, either through their own captive units or partner companies. While this outsourcing model is a cash cow, it also makes jobs here vulnerable to global economic jitters. The captive and third party back office services of major US banks have either stopped or planning to stop recruitments in the country, while many others have decided to put on hold their expansion plans.