The ANZ Bank has confirmed it is sending software development offshore and blames a local skills shortage for the decision which was announced last week.
Hundreds of local jobs are likely to be cut, although the bank was unable to confirm numbers.
However, ANZ spokesman Paul Edwards confirmed that no customer service operations will move outside Australia.
"Any number [put on] jobs to be moved at this point is pure speculation. We hope to minimize job losses," Edwards said.
The bank currently employs about 700 staff in Bangalore and this figure will rise to 1000 next year.
Edwards said the decision to move software development and technology support staff to India was partly due to a local skills shortage.
He said the bank is already sourcing labour offshore in a bid to fill the gap, adding that these skills are readily available in Bangalore.
But the main attraction is the low-cost environment of Bangalore, he said.
"Outsourcing relationships also provide a competitive advantage. The lower cost of performing certain tasks means that, in such a globalized and competitive landscape, offshoring provides real advantages," Edwards said.
"A number of major competitors, like GE and Citibank, already have substantial amounts of their technology and other banking operations in low-cost locations.
"These are the organizations we have to compete with in the marketplace; it will allow us to better compete globally."
While Citibank has moved its customer-facing operations to the Philippines, Australia's biggest banks have been reluctant to follow, fearing a customer backlash.
However, Finance Sector Union communications manager Rod Masson said all indications are that other banks will eventually offshore to effectively compete.
"This is a real concern because banks are the biggest IT employers in Australia and we are going to lose a highly skilled workforce," he said.
Masson estimates that up to 400 jobs could go at ANZ claiming it isn't just software development staff affected but IT workers across all business units.
The other three banks have all admitted in the past that they were assessing offshoring opportunities.
National Australia Bank spokesman Geoff Lynch said a small pilot program is under way to assess outsourcing opportunities.
He said accounts payable functions were signed over to Accenture, which is undertaking the work in India.
Lynch said NAB is reviewing other, non-customer facing options to be outsourced.
"The accounts payable move impacted about six individuals and out of the total number of staff in accounts payable, (23), 11 of them were contractors and six of them found other roles in the organization about a month or so ago," Lynch said.
"We don't have any other firm plans, but are certainly open to opportunities."
Westpac spokesman David Lording also confirmed the bank is reviewing outsourcing options, but said there are no immediate plans to offshore.
"We have outsourced a large number of our operations and still believe there is room for more within Australia, but even if we offshore back-office functions, we will only do it in small increments."
A spokesman from the Commonwealth Bank said it has no plans at this stage to offshore any work