Offshore Banking Unit in Bangladesh

1. OBU
Concept, Operation & Accounting
procedures
Enamul Hdua, cdcs

2. 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:
ACCESSIBILITY
Easy Access to accounts
(At least in terms of
regulations.
STABILITY
Protection from local
financial or political
instability
PRIVACY
Greater Privacy
TAX HAVENS
Low or No Taxation

3. “An Offshore Banking shall refer to the particular
conduct of banking operations in foreign currencies
conditionally approved by Bangladesh Bank which
intermediates in financial transaction between non-
resident borrowers and lenders. ”

4. It will refer to a specific business unit in the form of
distinct branch, booth or desk of a branch of a bank
that is duly approved by Bangladesh Bank to carry
out the offshore banking.
Offshore banking Division will control & supervise the offshore
banking operations.

5. CURRENCIES USED IN OBU
US dollar, Pound Sterling Deutsche Mark
Japanese Yen French Franc Swiss Franc
Canadian Dollar Dutch Guilder Swedish Kroner
Singapore Dollar South Korean Won and EURO.

6. CONDITION FOR LICENSING
Offshore banking activities shall be carried
out through Offshore Banking Unit/Units
under the control and supervision of Offshore
Banking Division of the bank.
There is no restriction on the physical
location of the OBU
Authorization of BEPZA/ BEZA/other similar
designated authority, if intended to locate the
OBU therein, is a prerequisite before
approaching to Bangladesh Bank.
Commence its offshore banking operation
within 6 (six) months from the issuing date of
approval

7. A non-resident is a person, bank or firm who/which
resides/has a place of business outside
Bangladesh.
Non-residents include Bangladesh nationals who go out of
Bangladesh for any purpose. On the other hand, the fact that a
person gives an address in Bangladesh does not necessarily
mean that he should be regarded as a resident if he is, in fact,
only a temporary visitor and is ordinarily resident elsewhere.

8. ENTERPRISES OF EPZ/EZ/HTP
A
100 percent foreign
owned including those
owned by Bangladeshi
nationals ordinarily
resident abroad
TYPE A
B
Joint venture between
foreign investors and
Bangladeshi
entrepreneurs resident in
Bangladesh
TYPE B
C
100 percent owned by
Bangladeshi
entrepreneurs resident
in Bangladesh.
TYPE C

9. TYPE A INDUSTRY TRANSACTIONS
• Collecting deposit from Person / Institutions
• Making Short Term Loan/Advance & Investment
• Discounting Bills
• Negotiating Bills
• Issuing letter of credit
• Issuing letter of Guarantee
• Other usual financial services

10. TYPE A INDUSTRY TRANSACTIONS
Prior permission from FEID,BB before making
any Medium & long Term financing facilities to
the said enterprises.
OBU can issue necessary instruments under
“The Negotiable Instrument Act,1881” for
deposit account like CD/SB/term Deposit.

11. TYPE B & C INDUSTRY TRANSACTIONS
• Making Short Term Loan/Advance &
Investment without prior approval from
Bangladesh Bank for Type B enterprises
of EPZ/EZ/HTP.
• Prior permission is required for making
loan /advance for Type B / Type C
enterprises not mentioned above.

12. SHALL ACCEPT DEPOSIT FROM :
• Type A enterprises of EPZ/PEPZ/EZ/HTPs
• Juristic persons not resident in Bangladesh
• Natural Persons not resident in Bangladesh

13. TRANSACTION WITH PERSON RESIDENTS IN
BANGLADESH
• Discount/purchase accepted usance/ deferred bills against
import from abroad on banker customer relationship
applying due diligence and arrange payment to overseas
suppliers.
• Discount/purchase accepted usance/ deferred export bills
against direct and deemed exports of products produced in
Bangladesh subject to compliance of applicable
instructions
• With prior permission from Banking Regulation and Policy
Department of Bangladesh Bank, may make medium or
long term loans/ advances to the industrial enterprises
resident in Bangladesh. Banking Regulation and Policy
Department along with appropriate analysis and supporting
documents

14. Fund Procurement for OBU
Source of finances for OBU :
• Its own fund at the Nostro Account
• Bank’s Treasury Division
• Local & Foreign Financial Institutions
Borrowing from other institutions is carried out both in bulk
and on individual bills to discount.
Banks may use funds mobilized from domestic banking operation with a
limit not exceeding 20% of its total regulatory capital.

15. COMPLIANCE WITH PRUDENTIAL REGULATIONS
1.1 Reserve Requirement :
For the maintenance of CRR, total demand and time liabilities of the bank shall
include the liability of offshore banking operation.
SLR shall also be maintained accordingly.
Banks have to maintain 5.50 per cent CRR with the central bank from their total
demand and time liabilities on a biweekly basis (maintained with Bangladesh taka
only).
SLR requirement is now 13 per cent daily for conventional banks and 5.5 per
cent for Islamic Shari'ah-based banks (cash in tills (both local and foreign
currency), gold, daily excess reserve (excess of cash reserve) maintained with the
BB, balance maintained with the agent bank of BB and un-encumbered approved
securities)

16. COMPLIANCE WITH PRUDENTIAL REGULATIONS
• Compliance with Basel Provision
• Prevention of Money Laundering and Financial terrorism regulations
• Application of Asset Liability Management (ALM) Guideline
• Asset-Liability Percentage: At the close of business on any day, value of offshore
banking assets in Bangladesh shall not be less than 75% of the liabilities of
offshore banking.

17. REPORTING OF OFFSHORE BANKING TRANSACTION
Classified Loan Statement:
Each OBU will prepare classified loan statement on monthly basis
and forward the same to concerned CAD department of Head Office.
CIB Reporting:
Each OBU will upload related credit information on web based CIB
Online System for credit extended to their clients on monthly basis
for onward submission as per CIB regulation of Bangladesh Bank.
Reporting to Bangladesh Bank:
Bank shall report their offshore banking transactions in relevant
statement/schedules in writing as well as report to online web portal.
Besides, OBU will submit reports/returns to different departments of
Bangladesh Bank as and when asked for.

18. THANK YOU