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Banks can set offshore units in SEZ: RBI

Reserve Bank of India has permitted banks to establish offshore banking units in special economic zones with preference being given to entities having overseas branches and experience of running such units.

All public sector, private sector and foreign banks, authorised to deal in foreign exchange, are eligible to set up OBUs, RBI said in a circular in Mumbai on Tuesday.

Since OBUs would be branches of Indian banks no separate assigned capital would be required. However, to enable them to start operations, the parent bank would be required to invest a minimum of $10 million, RBI said.

RBI said OBUs would be required to scrupulously follow anti-money laundering instructions and prohibited them from undertaking cash transactions, and with individuals.

Each of the eligible banks would be permitted to set up only one OBU to carry on wholesale banking operations. RBI would also grant exemption from the cash reserve ratio requirement to the parent bank with reference to its OBU branch.

Banks would be required to maintain statutory liquidity ratio under section 24 (1) of the Banking Regulation Act, 1949, in respect of their OBU branches. However, in case of necessity, request from individual banks for exemption would be considered for a specified period.

The Exim Policy for 2002-07 had announced setting up of OBUs in SEZs and accordingly RBI formulated a scheme and obtained the approval of the government.

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