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Off-Shore Banking Definition

Off-Shore means out of the shore or located or
based outside of one’s national boundaries.

Off-shore Banking Unit is a separate part or
unit of a Bank whether incorporated in
Bangladesh or outside Bangladesh involving
foreign currency denominated assets and
liabilities that are out of proportion to the
current account transactions of their domestic
business and shall maintain its own separate
books of accounts.

 There will be no statutory capital and reserve or liquidity requirement for an OBU. .  The operations of OBU shall be subject to the relevant laws of Bangladesh except those in respect of which exemptions are provided.Off-Shore Banking Characteristics  The OBU shall maintain its own separate accounts relating to off-shore banking business.

Even existing branches of Bank may be allowed to operate such units through a completely separate counter.Off-Shore Banking Characteristics  The OBUs shall carry on transactions in freely convertible foreign currencies. These may be located both in the EPZ or any other convenient location outside.  There would not be any restriction on the physical location of the OBU. .

Off-Shore Banking .  Type-A (wholly foreign owned) units in the Export Processing Zones in Bangladesh .Operation and Activities Deposit/borrow in Foreign Currency:  The OBU will be free to accept deposit from or to borrow from:  persons / institutions not resident in Bangladesh  Bangladesh nationals working abroad.

.Off-Shore Banking - Operation and Activities  The OBU shall not accept deposits from persons/institutions resident in Bangladesh including Type-B (Joint Venture) and Type-C (wholly local owned) units in the Export Processing Zones in Bangladesh.

.  Type-A (wholly foreign owned) units in the Export Processing Zones in Bangladesh.Off-Shore Banking - Operation and Activities  Lending in Foreign Currency:  persons / institutions not resident in Bangladesh.

 There would be no restriction on banking transactions with non residents.Off-Shore Banking - Operation and Activities  Banking transactions  Banking transactions with residents of Bangladesh outside EPZ will not be permissible. .

Off-Shore Banking - Operation and Activities  Maintaining Other Bank account in foreign Currency  Local banks may also maintain foreign currency accounts with OBUs like they maintain Nostro accounts with their foreign correspondence. .

Off-Shore Banking - Products or services  Products or services:  All type of Deposit/Borrowing/Lending with non-resident individual or company.  All type of foreign trade services. .

OBUs may discount/purchase import bills accepted by ADs in Bangladesh.Off-Shore Banking - Products or services  Off-shore financing through UPAS (Usance Payment at Sight).  Lending or Placement to ADs for Export Bill Purchasing/Discounting in Foreign Currency. .

Off-Shore Banking – Source of Fund  Sources of Fund:  Internal Source:  Deposit collection from non-resident/ A-Type Company. .  Borrowing from Head Office.

.Off-Shore Banking – Source of Fund  External Source:  Credit line with overseas bank /corresponding bank  Term borrowing from overseas bank or International Financial Institution or Inter Bank.

International Factoring International factoring is as an arrangement between an exporter and a factor whereby the factor purchases the trade debts from the exporter and provides the services such as finance. protection against credit risks etc. maintainance of sales ledger. . collection of debts.

.This allows the buyer to place an order on open account terms without opening letter of credit.International Factoring 1st Stage: The exporter signs a factoring agreement assigning all trade receivables to an export factor. 2nd Stage: The Export factor chooses an FCI (factor Chain International) correspondent to serve as an import factor in the country where goods are to be shipped. 3rd Stage: At the same time. the import factor investigates the credit standing of the buyer of the exporter’s goods and establishes lines of credit.The receivables are then reassigned to the import factor.

International Factoring 4th Stage: the exporter factor will now advance upto 80% of the invoice value to the exporter.the import factor collects the full invoice value and is responsible for the swift transmission of funds to the export factor who then pays the outstanding balance to the exporter. 5th Stage:Once the sale has taken place. .