3. IFC
•A financial centre operating from a physical location which
•Facilitates international activity and it
•Operates under a regulatory framework that meets international norms.
•It Provides financial services to international clients and
•Support services such as law, accountancy and technology.
An international financial center (IFC) is an intense concentration of a wide
variety of international financial businesses and transactions in one location.
4. A financial hub, also known as a financial center is a city or region where a large
number and a variety of financial services institutions are headquartered.
Financial center
5. The financial services (and products) provided by IFCs mainly comprises the following activities:
• Fund Raising
• Asset Management and Global Portfolio Diversification
• Personal Wealth Management
• Global Transfer Pricing
• Global Tax Management and Cross border Tax Liability Optimisation
• Global Risk Management Operations and Insurance/Re-insurance
• Global Corporate Treasury Management Operations
• Financial Engineering and Architecture for Large Complex Projects
• Global Mergers and Acquisitions Activity
• Financing for Global Public-Private Partnerships
6. Offshore Banking Unit (OBU)
Offshore banking unit, as the name suggests, is the branch of the Bank or a financial
institution based in a foreign country.
Example
• the branch of a Switzerland-based Bank located in France or the United States.
• a London-based bank with a branch located in Delhi.
• Local monetary authorities and governments do not restrict OBUs' activities;
• However, they are not allowed to accept domestic deposits or make loans to residents of the
country, in which they are physically situated.
• Overall OBUs can enjoy significantly more flexibility regarding national regulations.
Another example : https://bh.statebank/sbi-in-bahrain
7. Offshore Banking Unit (OBU)
• These branches offer loans and credits in the Eurocurrency financial Market.
• Here, Eurocurrency is defined as the amount stored in the financial institutions and the
branches of the bank based outside of the home country (where the currency is issued)
• For example, a deposit of U.S. dollars (USD) held in a British bank would be considered
eurocurrency, as would a deposit of British Pounds (GBP) made in the United States.
• Thus the term “eurocurrency” applies to any currency deposit held outside of the home
market in which that currency is issued.
• It does not necessarily need to involve European currencies.
• For instance, South Korean won (KPW) deposited at a bank in South Africa would be
considered eurocurrency, even if no European currency is involved.
8. Understanding the Offshore Banking Unit.
• Investors can also create an account in the offshore banking unit so that they can prevent tax
regulations and other strict regulations implemented in their home nation.
• While most government authorities restrict OBUs from processing any kind of deposits and loans
from people residing in the same country, they may allow it occasionally.
• Investors can benefit from this opportunity. They can save money in the offshore banking units to
avoid tax regulations. Some branches of the bank located offshore offer loans at low-interest rates.
• Besides, they may have a smoother and easier loan sanctioning process.
• The best part is that these banks do not impose any form of currency restrictions. Investors can
deposit money in different currencies.
• This gives the high Net worth and experienced investors an opportunity to trade in multiple
currencies and save their money in the offshore banking unit
9.
10. A special economic zone (SEZ) is an area in a country that is subject to different economic
regulations than other regions within the same country.
SEZ is an area in which the business and trade laws are different from the rest of the country.
SEZs are located within a country's national borders.
SEZ
SEZ Background
The Parliament passed the Special Economic Zones Act in 2005 In order to attract huge foreign
investments into the country. The Act came into force along with the SEZ Rules in 2006.
The chief objectives of the SEZ Act are:
1.To create additional economic activity.
2.To boost the export of goods and services.
3.To generate employment.
4.To boost domestic and foreign investments.
5.To develop infrastructure facilities.
11. List of SEZ in Karnataka https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1578141
Official website : http://sezindia.nic.in/
NOTES
As of June 2022;
270 SEZs are operational in the country.
About 64% of the SEZs are located in five states – Tamil Nadu, Telangana, Karnataka, Andhra
Pradesh and Maharashtra
12.
13. Features of special economic zone
One of the main objectives of SEZs was enhancing foreign investment and promote an favourable
environment for exports.
SEZs are developed with world class infrastructure, including roads, transport, storage, etc. and
attract foreign investors, thus leading to economic development.
•Enterprises that set up their establishment in SEZs are entitled to incentives, which may include
free electricity, water supply, subsidy on land prices, etc.
•These economic zones are designated duty-free industrial parks, to be treated as foreign
territory for trade operations, duties and tariffs.
•Usually, no licence is required for import and businesses get exemption from customs duty, on
import of capital goods, raw materials, consumable spares, etc.
•SEZs may enjoy exemption from payment of sales tax and service tax on the sale or purchase of
goods or services.
14. •Any supply of goods or services or both to a SEZ unit is considered a zero-rated
supply. In other words, supplies into SEZs are exempted from Goods and Services
Tax (GST) and are considered as exports.
•The important special economic zones features include employer-friendly labour laws.
For example, since SEZ units are considered as ‘public utility services’, no strikes are
allowed in such companies without giving the employer six weeks’ prior notice, in
addition to the other conditions mentioned in the Industrial Disputes Act, 1947.
15. Advantages
•15 year corporate tax holiday on export profit
•No licence required for import made under SEZ units.
•Duty free import or domestic procurement of goods for setting up of the SEZ units.
•Exemption from customs duty on import of capital goods, raw materials, consumables, spares,
etc.
•Exemption from Central Excise duty on the procurement of capital goods, raw materials, and
consumable spares, etc. from the domestic market.
•Exemption from payment of Service Tax.
•Setting up Off-shore Banking Units (OBU) allowed in SEZs.
•The Government has exempted SEZ Units from the payment of stamp duty and registration fees
on the lease/license of plots.
