Daffodil International University
Bangladesh => Business => Banking => Topic started by: Salma Akter on October 05, 2019, 02:49:03 PM
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Offshore banking can play a crucial role, internationally and domestically
The concept of offshore banking in Bangladesh is not new, and is getting very popular to among business-people in Bangladesh due to its overwhelming capacity to unlock the international financial settlement.
Offshore banking, by its name and structure, can play a pivotal role both in domestic and international territory. The banking facility handles the currency other than the local currency; customers with foreign currency necessity instead of the local currency ease international transaction instead of the domestic transaction.
The offshore banking activities in Bangladesh are taking new shapes and facing suddenly surfaced challenges in Bangladesh. To face the growing demand of the foreign currency of Bangladesh’s international trade participants, offshore banking is at its peak, to be guided with a re-energized and renewed look by the regulators, who are formulating guidelines with the recent change and challenges of the industry, though this is being heard for a long time.
Almost all the banks in Bangladesh have offshore banking licenses, but only 31 banks are actively participating in the business, most of whom are doing business on the discounting of local import and export bills, which is not the core function of offshore banking.
Offshore banking should be a window of a bank that is engaged to arrange foreign currency by borrowing, depositing and placing foreign currency from the international foreign currency holders.
In the age of the internationalized economy, the foreign currency reserves of a commercial bank is very poor, because of the slowing export operations throughout the bank, lowering remittance routing, and sluggish foreign direct investments to Bangladesh.
The offshore banking unit of a bank can boost the foreign currency reserve of a bank by engaging and participating in the international foreign currency market. A bank is as strong as its ability to arrange foreign currency for its customers who run their international transactions through that bank.
Not only that, offshore banking is free to lend in foreign currency, receive deposits in foreign currency, and conduct cross border transactions.
Offshore banking, since its inception in Bangladesh in 1988, is being run with the circular of the erstwhile Banking Control Division (BCD), which is very concise in magnitude, but very informative and elaborate in information.
On top of that, Bangladesh Bank issued two circulars by permitting the offshore banking units of the local banks to finance the import and export bills of the local businesses.
But there lacks lending, working, and treasury guidance for the offshore banks in Bangladesh, because offshore banks basically borrow foreign currency funds from abroad and create debt burden on the economy.
If the debt to the overseas lender is beyond the capacity and control, it will be a mess. So a proper, studied and time-befitting guideline from the regulators is the demand of the time.
By and large, offshore banking helps all global banking facilities stay in the local territory. It is not only a banking concept, but also a key to unlocking any padlock on international banking.
Source: https://www.dhakatribune.com/opinion/op-ed/2018/09/11/what-offshore-banking-does