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Definition of Offshore banking

It refers to the banking system which is set up in specially demarcated zones which are separate from the domestic banking system and which raised funds for its operation from offshore or non-resident sources for investment in domestic and or third country projects.

It also refers to the banking operations that cover only non-residents and do not mix with the domestic banking. An off shore 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 being imposed at lower rates or not being charged.

A more important relaxation for the offshore banks is the exemption from restrictions on operations. Offshore banking in these centers can carry on their activities of deposit taking and lending from/to international enterprises or investors without conflict with the domestic fiscal and monetary policy. Other benefits-i. Exemption from minimum reserve requirements
ii. Freedom from control on interest rates
iii. Low or non-existent taxes and levies.
iv. Entry is relatively easy, especially for large international banks.