MEANING:  It is a place where a deliberate attempt is made to attract international banking business by reducing or eliminating restrictions upon operations as well as lowering tax or other levies.

 It means carrying on banking activity which is insulated from the monetary regulations of the host country.  They are set up to attract international banking business of dealing in non-resident foreign currency denominated assets and liabilities.

Selected offshore Centers  Bahamas  Cayman Island  Panama  Hong kong  Bahrain  Singapore

CHARACTERISTICS OF OC  Local capital requirements is low or nil  License fee are low  Entry is relatively easy  Taxes are virtually non-existent.

OBJECTIVES  The reason for setting up OBC is that it would help to foster a regional capital market which enlarges the flow of foreign capital to raise the level of domestic investment.

LINK BETWEEN E-D MARKET AND OC  They are closely linked through international transactions.  The era of instant electronic communications has helped to integrate the markets scattered around the globe into one which is truly international, free, unregulated and highly competitive capital market.

OBC IN INDIA  The RBI suggested the setting up of OC within India to encourage offshore transactions and to developed the Indian forex market.

 OC would exposed Indian skilled manpower to international finance and business based on electronic data processing and telecommunications network if we set up OBC.

CONDITIONS FOR THE SUCCESS OF OBC  The absence of taxes  Absences of exchange regulations  Absence of banks supervision and control. They are essential but not adequate to make OBC a success.

 It is the understanding and flexibility with which the government and central bank deal with the international banks that is more important.

SOURCE  INTERNATIONAL FINANCIAL MARKETS AND INDIA : HR MACHIRAJU  ( CHAPTER 10)  LIBRARY ACCESS NO: 