Scope International, Standard Chartered's back office outsourcing center, employs more than 8,500 people in India.
"Over the course of the years, these captive centers have matured to an extent that they are doing a lot of high-value works as well," said Arup Roy, principal analyst in Mumbai at technology research firm Gartner.
The Standard Chartered issue, he said, would "lead to much greater level of scrutiny, and the governance processes and the risk and compliance processes would be under the lens".
Standard Chartered said it has been in talks with U.S. authorities over its Iran transactions since early 2010 and said the public accusations by New York came as a shock.
On Wednesday, it won some help from Britain's central bank governor, who said the various regulators should coordinate action and publish findings only when investigations are complete.
While shipping of jobs by global banks to low-cost locations will continue, analysts said banks would have to invest more to strengthen internal processes and controls.
"What I have seen is that a lot of these discussions happen internally or in-house because security is obviously a dominant area of concern and by virtue of that a lot of them follow the book as they see," said Mayur Sahni, a Singapore-based senior market analyst for IDC Asia/Pacific. "But they don't revise the book when the newer version comes up," he said.
Most banks are reluctant to talk about their offshore operations in India. Standard Chartered, JPMorgan, HSBC and RBS declined to comment when contacted by Reuters, while Barclays, Bank of America Merrill Lynch, and Goldman Sachs did not immediately respond to emails.
Financial services firms can cut costs by one-third or more by shifting work to in-house operations in India.
The global market for back-office offshore services was $4 billion in 2010 and will grow to $9.4 billion by 2015, according to IDC. The financial sector accounts for the biggest share.
The New York regulator's accusations come close on the heels of a backlash in Britain after customers of RBS and its Natwest unit were left locked out of their accounts for a week due to an inexperienced IT operator in Hyderabad, media reports said.
A recent U.S. Senate probe criticizing anti-money laundering controls at HSBC identified deficiencies in the work done by its "offshore reviewers" in India, according to media reports.
HSBC has one of the biggest captive operations in India, with about 20,000 people spread across seven locations.
In 2006, the security of Indian back office operations came under scrutiny after a British TV channel's investigation showed that criminal networks in India traded British consumers' account details and other commercial information for profit.
In the same year, a worker at HSBC's Bangalore centee was arrested after being caught by internal security for taking funds from British bank customers.
"When you offshore, you can't sort of offshore your problems. You have got to have a proper structure in place and you have to have more centralization of processes," said IndusView's Rangar.
"And once you do that, it really shouldn't matter as to whether you are based in Houston or Edinburgh or Chennai."
(Edting by Tony Munroe and Jeremy Laurence)
Copyright 2012 by Reuters. All rights reserved.
Copyright 2013 Thomson Reuters. Click For Restrictions