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jurisdictions have prudent, sound regulations in place

geared towards safeguarding the deposits and

maintaining their confidentiality. However, some weigh

their benefits in taxation, while others in confidentiality,and so forth. Though they all offer a comparatively

confidential and secure environment, it bears

consideration to outline what the banking goals are and

then choose the jurisdiction accordingly. A small minority

of the offshore jurisdictions do a poor job of managing

and regulating their banking institutions, but the

informed investor or advisor will deem these as

unsuitable for themselves or their clients. Further, these

poorly organized and run jurisdictions are often

manipulated by illicit depositors and hence prove easy

targets of the FATF (Financial Action Task Force) looking

for money laundering or other criminal activity

DEFINITION:An offshore bank is a bank located outside the country of 

residence of the depositor, typically in a low tax

jurisdiction (or tax haven) that provides financial and

legal advantages. These advantages typically include:

1. Greater privacy

2. Low or no taxation (i.e. tax havens)

3. Easy access to deposits (at least in terms of 

regulation)

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4. Protection against local political or financial

instability

5. Protection from lawsuits

6.Asset protection7.Simplicity

REGULATION OF OFF SHORE BANKS:

In the 21st century, regulation of offshore banking is

allegedly improving, although critics maintain it remainslargely insufficient. The quality of the regulation ismonitored by supra-national bodies such as theInternational Monetary Fund (IMF). Banks are generallyrequired to maintain capital adequacy in accordance withinternational standards. They must report at leastquarterly to the regulator on the current state of thebusiness.

Since the late 1990s, especially following September 11,2001, there have been a number of initiatives to increasethe transparency of offshore banking, although criticssuch as the Association for the Taxation of FinancialTransactions for the Aid of Citizens (ATTAC) non-governmental organization (NGO) maintain that theyhave been insufficient. A few examples of these are:

• The tightening of anti-money laundering regulationsin many countries including most popular offshorebanking locations means that bankers are required,by good faith, to report suspicion of moneylaundering to the local police authority, regardless of 

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banking secrecy rules. There is more internationalco-operation between police authorities.

• In the US the Internal Revenue Service (IRS)introduced Qualifying Intermediary requirements,

which mean that the names of the recipients of US-source investment income are passed to the IRS.

• Following 9/11 the US introduced the USA PATRIOTAct, which authorizes the US authorities to seize theassets of a bank, where it is believed that the bankholds assets for a suspected criminal. Similarmeasures have been introduced in some othercountries.

• The European Union has introduced sharing of information between certain jurisdictions, andenforced this in respect of certain controlled centers,such as the UK Offshore Islands, so that taxinformation is able to be shared in respect of interest.

Joseph Stiglitz, 2001 Nobel laureate for economics and

former World Bank Chief Economist, told to reporter LucyKomisar, investigating on the Clearstream scandal:

"You ask why, if there's an important role for a regulatedbanking system, do you allow a non-regulated bankingsystem to continue? It's in the interest of some of themoneyed interests to allow this to occur. It's not anaccident; it could have been shut down at any time. If yousaid the US, the UK, the major G7 banks will not deal with

offshore bank centers that don't comply with G7 banksregulations, these banks could not exist. They only existbecause they engage in transactions with standardbanks."

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In the 1970s through the 1990s it was possible to ownyour own personal offshore bank; mobster Meyer Lansky had done this to launder his casino money. Changes inoffshore banking regulation in the 1990s in the form of 

"due diligence" (a legal construct) make offshore bankcreation really only possible for medium to largemultinational corporations that may be family owned orrun.

Weakened Bank Secrecy : 

Since starting to survey offshore jurisdictions on April 2,

2009, the Organization for Economic Cooperation andDevelopment (OECD)) at the forefront of a crackdown ontax evasion, won't object to governments using stolenbank data to track down tax cheats in offshore center.The recent sharing of confidential UBS bank details about285 clients suspected of willful tax evasion by the UnitedStates Internal Revenue Service was ruled a violation of both Swiss law and the country’s constitution by a Swiss

federal administrative court. Nevertheless, OECD hasremoved 18 countries, including Switzerland,Liechtenstein and Luxembourg, from a so-called "greylist" of nations that did not offer sufficient taxtransparency, and has re-categorized them as “white list”nations. Countries that do not comply may facesanctions. A notable exception is Panama, whose canal iscurrently needed by all Western nations, provides it witha unique type of immunity to international pressure.Given the enlargement of the canal to accommodatelarger shipping, it is unlikely in the foreseeable future thatPanama would likely succumb to international pressuretoward transparency.

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ADVANTAGES:

• Offshore banks can sometimes provide access to politically

and economically stable jurisdictions. This will be anadvantage for residents in areas where there is risk of 

political turmoil, who fear their assets may be frozen,

seized or disappear. However, developed countries with

regulated banking systems offer the same advantages in

terms of stability.

• Some offshore banks may operate with a lower cost baseand can provide higher interest rates than the legal rate in

the home country due to lower overheads and a lack of 

government intervention. Advocates of offshore banking

often characterize government regulation as a form of tax

on domestic banks, reducing interest rates on deposits.

• Offshore finance is one of the few industries, along withtourism, in which geographically remote island nations can

competitively engage. It can help developing countries

source investment and create growth in their economies,

and can help redistribute world finance from the developed

to the developing world.

• Interest is generally paid by offshore banks without tax

being deducted. This is an advantage to individuals who do

not pay tax on worldwide income, or who do not pay tax

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until the tax return is agreed, or who feel that they can

illegally evade tax by hiding the interest income.

•

Some offshore banks offer banking services that may notbe available from domestic banks such as anonymous bank 

accounts, higher or lower rate loans based on risk and

investment opportunities not available elsewhere.

• Offshore banking is often linked to other structures, such as

offshore companies, trusts or foundations, which may have

specific tax advantages for some individuals.

• Many advocates of offshore banking also assert that the

creation of tax and banking competition is an advantage of 

the industry, arguing with Charles Tiebout that tax

competition allows people to choose an appropriate balance

of services and taxes. Critics of the industry, however,

claim this competition as a disadvantage, arguing that itencourages a "race to the bottom" in which governments in

developed countries are pressured to deregulate their own

banking systems in an attempt to prevent the off shoring of 

capital.

 

DISADVANTAGES:

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• Offshore bank accounts are less financially secure. In a

banking crisis which swept the world in 2008 the only

savers who lost money were those who had deposited their 

funds in offshore branches of Icelandic banks such asKaupthing Singer & Friedlander. Those who had deposited

with the same banks onshore received all of their money

back. In 2009 The Isle of Man authorities were keen to

point out that 90% of the claimants were paid, although this

only referred to the number of people who had received

money from their depositor compensation scheme and notthe amount of money refunded. In reality only 40% of 

depositor funds had been repaid 24.8% in September 2009

and 15.2% in December 2009. Both offshore and onshore

banking centers often have depositor compensation

schemes. For example The Isle of Man compensation

scheme guarantees £50,000 of net deposits per individual

depositor or £20,000 for most other categories of depositor 

and point out that potential depositors should be aware that

any deposits over that amount are at risk. However only

offshore centers such as the Isle of Man have refused to

compensate depositors 100% of their funds following Bank 

collapses. Onshore depositors have been refunded in full

regardless of what the compensation limit of that country

has stated thus banking offshore is historically riskier than

banking onshore.

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• Offshore bank accounts are sometimes touted as the

solution to every legal, financial and asset protection

strategy but this is often much more exaggerated than the

reality.

HISTORY OF OFF-SHORE BANKING

The origins of the offshore banking industry are found in

a group of islands off the northwest coast of France: the

Channel Islands.  Several years ago a group of likeminded bankers and government officials decided to offer

an offshore remedy of lower taxation and promises of 

anonymity and confidentiality.  The intent was to seize

upon the frustration of UK and European residents fed up

with oppressively high rates of taxation and insufficient

safeguards to privacy and confidentiality in their home

countries.  These offshore banking institutions and new

offshore financial centers gained instant notoriety and

popularity.  The offshore banking industry was born.  As

word spread across Europe and indeed throughout the

world, other small island nations and jurisdictions seized

upon the opportunity and began strengthening

regulations regarding banking practices and client

confidentiality in the hopes of attracting foreign

depositors; thus becoming offshore banking jurisdictions

and offshore financial centers. This became particularly

popular in the small island nations of the Caribbean which

is what many tend to associate with offshore banking

jurisdictions. Investors and depositors seeking politically

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and economically stable jurisdictions found their way to

these offshore financial centers and this practice

continues today.  Although an abbreviated and perhaps

oversimplified version of history, these are,fundamentally, the roots of the modern offshore banking

industry.

Similar to offshore companies, offshore banking is really

just the practice of banking in another country; however,

the term is generally associated with "tax haven"

jurisdictions characterized by low or zero taxation on

interest, dividends, royalties and foreign derived incomeas well as having some degree of banking confidentiality.

Over time this term has evolved to include other

onshore ﾝ popular banking jurisdictions such as

Switzerland, Austria, Lichtenstein, Luxembourg and more

recently Asian jurisdictions such as Singapore and Hong

Kong  These jurisdictions gained considerable popularity

for the same reasons as the small island offshorefinancial centers:  they implemented sound banking

practices codified in law and regulations guaranteeing

confidentiality, low taxation and security.

OFF SHORE FINANCIAL CENTRES:

In terms of offshore banking centers, in terms of total

deposits, the global market is dominated by two keyjurisdictions: Switzerland and the Cayman Islands,although numerous other offshore jurisdictions alsoprovide offshore banking to a greater or lesser degree. Inparticular, Jersey, Guernsey and the Isle of Man areknown for their well regulated banking infrastructure.

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Some offshore jurisdictions have steered their financialsectors away from offshore banking, as difficult toproperly regulate and liable to give rise to financialscandal.

List of offshore financial centers:

Offshore financial centers include:

• Antigua and Barbuda • Bahamas • Barbados • Belize • Bermuda • British Virgin Islands • Cayman Islands • Channel Islands (Jersey and Guernsey)• Cook Islands • Cyprus • Dominica • Gibraltar is no more an offshore centre since 30 June

2006. No new Exempt Company certificates arebeing issued from that date.

• Ghana • Hong Kong • Isle of Man • Labuan, Malaysia • Liechtenstein • Luxembourg • Malta • Macau • Mauritius • Monaco • Montserrat • Nauru 

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• Panama • Saint Kitts and Nevis • Seychelles • Singapore • Switzerland • Turks and Caicos Islands

OFFSHORE BANKING FACTS

Offshore banking and offshore banks are often

misunderstood and intentionally maligned by

governments of high taxing jurisdictions. It is important to

note that just like an offshore company, an offshore bank

is merely a bank domiciled in a country other than that of 

the person's country of residence, domicile or

citizenship.  Hollywood has also done a good job of 

associating offshore banking with cigarette boats, private

jets and criminals of all kinds.  In reality, these offshore

jurisdictions and offshore banks are very different than

what typically conjures in the mind.  Let us look at some

myths and facts about offshore banking with an unbiased

and historical perspective.

• Offshore banks are only used to evade taxes

Fact: Popular offshore banking jurisdictions often provide

a number of benefits over onshore banks including lower

administration costs, higher interest rates, the ability to

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deposit and transact in multiple currencies, increased

privacy, access to otherwise unavailable international

investments, sophisticated private banking, the ability to

facilitate international business transactions, etc.Additionally, offshore banking provides increased asset

protection from potential extraneous lawsuits, unstable

governments, unstable economic conditions, unlawful

seizure, etc.

• Offshore banking is only conducted by money

launderers, drug dealers, weapons smugglers

and terrorists.

Fact: There is no question that offshore banks have been

abused in the past by some of these unwanted elements.

The days of showing up to the bank with a bag full of 

cash are long over however.  Offshore banks have strict

account opening procedures and follow internationally

accepted best practices for screening new applicants aswell as ongoing due diligence to monitor account activity.

Let us also maintain a proper perspective on this.  These

same unwanted elements have been "offshore" banking

in the US and UK for many years due to the lax

restrictions on foreign deposits, particularly through

securities firms, in these two countries.

• Offshore banks are less secure than onshore

banks.

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Fact: Depositors need to consider all factors when

choosing a banking jurisdiction. Many of these offshore

banks and banking jurisdictions have histories far

superior to that of banks in their own country. Many havelending practices (reserve requirements, risk tolerance,

etc.) that are much stricter than that of the banking

institutions in their big "onshore" countries. Many

offshore banks make the bulk money off of traditional

commercial banking rather than investment banking and

lending as well.  The latest wave of bank failures around

the world were mostly contained in the major "onshore"

banking centers due to loose reserve requirements and

investment banking practices.  The offshore banks in

traditional offshore banking jurisdictions fared much

better on the whole.

OFFSHORE BANKINS STRATEGIES

We generally leave the offshore banking business and

questions about potential uses to our offshore partner

banks; however, we often field questions regarding these

issues and find it necessary to explain a few simple

strategies often utilized.  None of the information in this

section and indeed in this website should be construed as

tax advice in your home country.  These strategies may

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a higher rate of interest.  Your interest payments may be

tax deductible expenses allowing you to save taxes in

future years.

Scenario #2 (Property Mortgage)

You are building a new house or buying a piece of 

property and need cash.  Your offshore bank can draft a

back to back loan as a mortgage at an interest rate and

term of your choosing (usually at a fairly high rate within

reason) allowing you to purchase the property and

maintain a lien on the property by filing the mortgage.Many high net worth individuals prefer not to own

property and investments in their own names and seek

arrangements which make their assets more difficult to

locate for potential adversaries.  This is a popular

strategy in these cases.  Any searches for assets would

turn up a fully mortgaged home rather than one owned

free and clear.  These loans may be kept "topped up"ﾝ to100% of the value of the home as well.  As with the

business loan, interest payments are often tax deductible

providing future income tax savings which may come in

handy, especially if you have the good fortune of being in

the highest tax brackets.

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OFFSHORE BANKING – A LUCRATIVE

PROPOSITION

BY C.JEEVANANDAM

Financial experts have been pleading to establish an

offshore banking centre in India. Geographically, India

provides distinct advantages in attracting offshore

banking units, because it has a stable economic and 

political performance, a vast market, technical manpower 

that could find employment in these centers. Thequestion is: Will these offshore banking units fulfill Mr.

Murasoli Maran's cherished goals?

ONE of the significant features of the Exim Policy is the

proposal to permit offshore banking units (or overseas

banking units) in Special Economic Zones (SEZs).

Offshore banking refers to the international banking

business involving non-resident foreign currency-denominated assets and liabilities. It refers to the

banking operations that cover only non-residents, and

does not include domestic banking. An offshore banking

centre is a place where deliberate attempt is made to

attract international banking by offering many

concessions in the form of taxes and levies imposed at

lower rates.

A more important relaxation is the exemption of the

offshore banks from restrictions on operations. Offshore

banking units in these centres can carry on their activities

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with international enterprises or investors without

conflicting with the domestic fiscal and monetary policy.

Offshore banking is an extension of the euro-currency

concept to the East, which provides a link between euro-

currency markets and the final borrowers. They provide

essential time zone links that are truly world-wide, and

ensure that the market operates 24 hours a day. While

offshore banking is an integral part of the euro-market,

what distinguishes it from the mainstream euro market is

that it was specially set up by host countries to promote

international banking.

Offshore banking units are branches of international

banks or other subsidiaries or affiliates. They do not carry

retail business, but generally provide wholesale banking

services project financing, syndicated loans, issue of 

short-term and medium term instruments, such as

negotiable certificates of deposits and capital notes aswell as merchant banking activities in foreign currency

denominated bonds and equity shares.

The deals are mostly between banks or with large

borrowers or multinational corporations. MNCs prefer

transacting in offshore financial centres because of 

certain apparent advantages: Avoidance of high tax

incidence; freedom from exchange control; maintenanceof secrecy of deals due to non-interference from

government and regulatory authorities; and deferring tax

by floating subsidiary units in such centres and delaying

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their remittance of profits to the parent company, when it

would be taxed.

Participation of the Indian banks

Few Indian banks, such as State Bank of India, Indian

Overseas Bank, Bank of India and Bank of Baroda, have

set up offshore banking units for deposit taking and final

lending at Bahrain, Hong Kong, Colombo, Cayman

Islands, and so on. Indian Bank, Bank of Baroda and

Union Bank of India jointly floated a deposit taking

company, IBU International Finance, in Hong Kong forboth offshore and onshore banking.

The benefits for the Indian banks from these ventures

are:

Sizeable profits as these ventures involve relatively  

low operating costs.

With multi-currency 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.

Offshore banking centre in India

Financial experts have been pleading to establish an

offshore banking centre in India. Geographically, India

provides distinct advantages in attracting offshore

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banking units, because it has a stable economic and

political performance, a vast market, technical manpower

that could find employment in these centers. Another

advantage is that the Indian market would open a littlebefore the Tokyo market closes, and close before New

York opens, thus providing a vital time link for

international money market dealers.

In an era where many Indian corporations are functioning

abroad, and many corporations are granted permission to

seek overseas finance, establishing an offshore unit will

help tap the resources:

Exporters would benefit in terms of finer margins on  

loans and better foreign exchange rates available via an

offshore banking unit.

The benefits of multi-currency operations which, to an

extent, minimize currency fluctuation risk will be an

added advantage.

Salaries paid by offshore banks and local expenditure  

incurred by them contribute to the economy's welfare.

For smaller countries, the benefit would be greater. For a

larger country such as India, however, this may not form

a significant portion of the total income.

India may earn revenue in the form of license fees,  profit taxes imposed on the banks operating in the area.

It may also get the benefit of banks' funds in the form of 

capital and liquidity requirements.

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The country can gain improved access to the  

international capital markets.

The domestic financial system may become more  

efficient through increased competition and exposure of the domestic banks to the practices of offshore banks.

The offshore banking centers will provide opportunities  

to train the local staff which will, in turn, contribute to

faster economic growth.

The offshore banking units would help channelize non-

resident Indian investments.

Setting up offshore banking centers would trigger  

enforced development of more advanced communication

facilities a must for their functioning.

But establishing offshore centers also comes with a price:

The supervision and regulation of offshore banks may  

involve substantial costs.

Encouraging offshore banking may result in the  

diminution in autonomy of domestic monetary policy,

since it is difficult to draw a line always between the

offshore and onshore operations, particularly in the

absence of exchange control.

Offshore banking provides scope for tax evasion by  

residents. For instance, in Hong Kong, it was found that

residents place deposits with offshore banks and takeloans of the same amount. The interest on loan would be

a deductible expenditure for taxation, while the income

from interest on deposits is not taxed.

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Offshore banks may prove to be harmful competitors  

to the local banks and may inhibit their growth.

For long, Mumbai was considered suitable for establishing

offshore banking here. The city has all the requirements

goods infrastructure in the form of telecommunications

and services, abundant and well-trained manpower and

presence of many international banks, both Indian and

foreign, already engaged in international banking.

The Sodhani Committee on Foreign Exchange Reforms

(1996) has recommended allowing Indian banks andfinancial As against the general recommendation of 

permitting offshore banking units only at Mumbai, the

present proposal is to permit them at Special Economic

Zones. This is a wise move since both offshore banking

centers and SEZs have many things in common as

regards administration and purpose. The establishment of 

offshore centers in India was foreseen when the ForeignExchange Regulation Act (FERA) was replaced by the

Foreign Exchange Management Act, 1999 (FEMA). Article

10 of FEMA included offshore banking units as one of the

authorities to whom the RBI could delegate powers for

dealing in foreign exchange. The question is: Will these

offshore banking units fulfill Mr. Maran's cherished goals?

The RBI is expected to bring out regulations regarding

setting up these units in India. A lot depends on how far

these regulations are liberal and pragmatic.

CASE STUDY 

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For over 25 years OCRA Worldwide has been assistingclients to establish and administer offshore andinternational bank accounts and has developed usefulexpertise in identifying and working with suitable offshore

banks and international banks.

Most importantly, OCRA Worldwide is not an offshorebank, we are a licensed international and offshorecorporate and trust services provider. However, asignificant percentage of the companies and trusts weadminister establish accounts with international andoffshore banks rather than domestic banks because often

their characteristics include:

• Familiarity with offshore and international business.• Worldwide investment and business perspective.• Tax-efficiency.• Confidentiality.• Lack of foreign exchange controls.• Access to special investment opportunities.

The objective of our website is to advise potential clients

of the "basics" and to provide answers to the more

common questions relating to offshore banks and

establishing and administering an offshore bank account.

Offshore Bank Account Opening

Procedures & Maintenance

All the offshore and international banks we work with

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regard the prevention of money laundering and terrorist

financing to be of the utmost importance, so do we.

OCRA Worldwide does not seek to work with offshorebanks which have low standards of compliance as, apart

from our own desire to only work with reputable partners,

the culture and business ethos of such offshore banks

must not be flawed.

Consequently the offshore and international banks we

work with will seek to:

• Obtain evidence of our clients' identities,• Develop a documented understanding of our client's

banking and business activities,• Identify the source of funds paid into accounts to

ensure that such funds are not derived from criminalactivity and to document evidence relating to sourceof funds.

• Monitor banking transactions to identify and forestallmoney laundering,

• Risks assess each and every client.

This means that offshore account opening procedures can

be onerous and time consuming.

Typically offshore banks will require some or all of the

following information to open and operate an offshore

account for a simple offshore company which is owned by

individuals (rather than a corporation, trust or other form

of entity):

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• Certified proof of identity of owners, directors,account signatories and all parties connected withthe offshore company.

• Acceptable proof of identity would normally include a

passport copy certified in a prescribed manner by anofficer of the bank, a notary or an authorized OCRAWorldwide Manager.

• Proof of residence of all parties associated with theoffshore company. Acceptable proof of residencewould typically include an original bank statement orcredit card statement.

• Information relating to the expected annual income

or asset base of the offshore company, the numberof transactions per month, the geographic spread of the proposed business and the amount of moneythat will be left on deposit at the bank.

• A detailed description of the proposed businessactivity, often supported by documentation such asbrochures, copies of contracts, audited accounts,business plans and details of trading partners or

investments.• Documented evidence relating to source of funds,

e.g. if a million dollars is to be paid into an offshorecompany's account, the bank will seek to obtaindocumentary evidence relating to the source of suchfunds in the form of a bank statement, contract orsimilar.

• An initial meeting with potential bankers possibly

with an OCRA Worldwide Manager. Some banksrequire clients to visit them on an annual basis.• In addition, enhanced due diligence will be

undertaken if the affairs of the offshore company arecomplex or if it, or any party connected to it, isassociated with what banks or regulators perceive to

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Why?

• There are various legislative and regulatory

requirements and precedents relating to the dutiesof directors and trustees relating to their obligationsto exercise effective management and control over acompany's or trust's assets and affairs. Put moresimply, would any reasonable businessperson, awareof the duties and liabilities of directors or trustees, beprepared to act as a director of a company or act asa trustee, if they did not control the company's or

trust's bank account?• If our clients were to exercise control over bank

accounts it could be perceived that they arecontrolling the affairs of the company or trust eventhough they may not be officers or trustees.Statutory authorities in high tax and other areasoften seek to apply "the management and controltest" to assess whether the profits/income earned by

an entity controlled in a low tax area should be taxedas if they were resident in the high tax area. There isan inherent possibility that if we allowed clients tocontrol bank accounts, then a regulatory authoritymay deem that our clients are effectively managingand controlling the company or trust in theircountries of residence or more radically may seek topierce the corporate veil or judge a trust to be a"sham".

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REGULATION IN RBI

Notification No: FEMA71/2002- RB

Dated September 7, 2002

In exercise of the powers conferred by Section 6, Section 7, Section 8, Section 9 and Section 47

of the Foreign Exchange Management Act, 1999 (Act 42 of 1999) and all other powers enabling

it in this behalf, the Reserve Bank of India makes the following Regulations, namely: -

CHAPTER I

1. Short title and commencement

i. These Regulations shall be called the Foreign Exchange Management (Offshore Banking

Unit) Regulations, 2002

ii. They shall come into force from the date of their publication in the Official Gazette.

2.Definitions:

In these Regulations, unless the context requires otherwise-

i. ‘Act’ means the Foreign Exchange Management Act, 1999 (Act 42 of 1999);

ii. ‘Offshore Banking Unit’ means a branch of a bank in India located in the Special

Economic Zone and holds an authorisation issued under clause (a) of sub-section(1) of 

section 23 of the Banking Regulation Act, 1949 (10 of 1949);

iii. ‘Regulations’ means the Regulations made under the Act;

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iv. ‘Special Economic Zone’ means the Special Economic Zone notified by the Government

of India;

v. Words and expressions used but not defined in these Regulations shall have the same

meanings respectively assigned to them in the Act.

CHAPTER- II

PART 1

3. Notwithstanding the status, as an authorised dealer, of the bank setting up the Offshore

Banking Unit, and save as otherwise directed by the Reserve Bank, the Offshore Banking Unit

shall not be regarded as an authorised dealer for the purpose of the Act, rules or regulations made

thereunder.

4. Save as otherwise provided in these or any other Regulations or directed by the Reserve Bank,

nothing contained in any other Regulations shall apply to an Offshore Banking Unit.

5. Save as otherwise provided in these Regulations or with the permission of the Reserve Bank,

an Offshore Banking Unit shall not conduct any activity or undertake any transaction with

residents in India.

PART II

Transactions which may be undertaken by an Offshore Banking Unit

6. An Offshore Banking Unit may undertake foreign exchange transactions with any authorised

dealer in India only on principal-to-principal basis.

7. An Offshore Banking Unit may undertake transaction in foreign change with a unit located in

Special Economic Zone to the extent the latter is eligible to enter into or undertake such

transaction, within the ceilings and subject to the conditions specified in the Regulations

governing such transaction.

8. Engagement of an Offshore Banking Unit in any of the forms of business specified in sub-

section (1) of section 6 of the Banking Regulation Act, 1949 shall be only in foreign exchange

and shall be subject to these Regulations and the conditions of licence issued under the said Act.

THIS INFO IS 4M www.rbi.org.in 

THIS INFO IS 4M www.hinduonnet.com

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BIBLIOGRAPHY 

www.rbi.org.in www.sterlingoffshore.com

www.hinduonnet.com

www.google.com

 

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