2. Question:
What is correspondent banking & off shore banking.
What are the advantages and difference between two.
Answer:
CORRESPONDENT BANKING:
Correspondent banks are those banks in a country that
are set up to provide services for another bank or
financial institution in a foreign country.
The services provided by a correspondent bank
include money transfers, currency exchange, trade
documentation and business transactions.
3. Advantages:
Rapid Movement of Funds:
In this cheques of country banks are cleared and collected without much delay.
Thus there is a rapid movement of funds from one area to the other. This
system facilitates trade and industry.
Help in Dealing in Securities:
Correspondent city banks help the country banks in the buying and selling of
securities.
Help in Providing Finance:
Such banks also help the country banks in financing loans and advances by
providing them funds.
Help in Foreign Exchange Transactions:
They facilitate foreign exchange transactions of their correspondent banks.
Increase in Mobility of Credit:
They increase the geographical mobility of credit when business is transacted
from one area to the other through these banks.
4. OFFSHORE BANKING:
An offshore banking unit (OBU) is a bank shell branch,
located in another international financial center.
Offshore banking units (OBUs) refer to bank branches
located outside of its home country, and handling
transactions made in foreign currency.
It can accept deposit from NRIs, foreign banks & OBUs.
It can sanctioned loan.
For Example:
A London-based bank with a branch located in Delhi.
5. Advantages:
Enjoying the highest service levels
Having convenient and accessible access to
funds
So you can access international investment
opportunities
To benefit from foreign exchange services
For superior lending and credit facilities