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Offshore Banking
services
Offshore banking units are branches of international
banks or subsidiaries. They do not carry retail business,
but generally provide
project financing
wholesale banking services
syndicated loans
merchant banking activities
Deposit taking
Foreign exchange
Fund management
Investment management and investment custody
Letters of credit and trade finance
Presence of OBU
worldwide
Offshore banking is carried out in about 20
centres throughout the world which offer
the following benefits:
Exemption from minimum reserve
requirements i.e CRR, SLR..
Freedom from control on interest rates
Low or nonexistent taxes and levies
Entry is relatively easy
License fees are generally low.
Features of Offshore
Banking
Involves nonresident foreign
currencydenominated assets and
liabilities
Enjoy many concessions in taxations,
exchange control regulations and
other banking regulations
The markets operates 24 hours a day
Provide Wholesale banking services
Participation of the
Indian banks
State Bank of India, Indian Overseas Bank, Bank of India and
Bank of Baroda, have set up offshore banking units at Bahrain,
Hong Kong, Colombo, Cayman Islands, and so on.
The benefits for the Indian banks from these ventures
are:
Sizeable profits as these ventures involve relatively low
operating costs.
With multicurrency deposit bases, the banks would be able to
serve better the needs of their customers who have set up
joint ventures abroad in the form of foreign currency finance.
The banks would strengthen the country's balance of
payments through repatriation of profits from the venture.
Regulation of offshore
banks
The quality of the regulation is monitored by supranational bodies such as the International Monetary
Fund(IMF). Banks are generally required to maintain
capital adequacy in accordance with international
standards. They must report at least quarterly to the
regulator on the current state of the business.
The tightening of anti-money laundering regulations
in many countries including most popular offshore
banking locations means that bankers are required, by
good faith, to report suspicion of money laundering to
the local police authority, regardless of banking
secrecy rules. There is more international co-operation
between police authorities.
In the US the Internal Revenue Service (IRS)
introduced Qualifying Intermediary requirements,