J.P. Morgan & Co. plans to start commercial banking operations in Bombay by November.
Morgan and other U.S. banks trying to establish a beachhead in India are betting on continued prosperity for the world's second-most-populous nation.
Citicorp and BankAmerica announced earlier this year that they planned to open a branches in Hyderabad. Citicorp already has seven branches in India, and BankAmerica four.
Four other U.S. banks-First Union Corp., BankBoston Corp., State Street Corp., and NationsBank Corp.-have also opened offices in India over the last few years.
In May the United States imposed sanctions on India and Pakistan for setting off a series of nuclear devices in violation of international accords calling for a moratorium on such testing.
The sanctions barred U.S. institutions from making loans to Indian and Pakistani government agencies, suspended U.S. government foreign aid and loan guarantees, and required Congress to block loans to India and Pakistan by the World Bank and other multilateral lending agencies.
Last week India announced it was prepared to sign the Comprehensive Test Bank Treaty, barring any further nuclear tests.
Banking sources speculated that the decision by India to adhere to the international agreement could pave the way for a normalization of commercial relations.
This year Morgan obtained Indian government approval to open a banking office after selling a 40% stake it owned in a joint banking venture with Industrial Credit and Investment Corp., India's largest investment bank.
The bank has said it plans to engage in corporate finance, foreign exchange and government securities trading, financial advisory services, loans, and offshore placements.
Morgan officials in India also told the Dow Jones news service last week that the bank plans to set up a $75 million to $100 million fund to invest in Indian bonds.
U.S. banks' plans to expand in India come despite turmoil in financial markets in Asia, Eastern Europe, and Latin America.
However, Indian banking sources said the country's markets are largely domestically oriented and the financial crises elsewhere have had little impact, despite some pressure on the Indian rupee and on India's stock markets.
Banking sources as well as Finance Minister Yashwant Sinha also said they expect the sanctions to have only a moderately negative effect on the country's economy and on foreign investments.