'Offshore banking needs extensive promotion'

In Bangladesh, offshore banking started in the mid-1980s, targeting to serve foreign-owned enterprises in Export Processing Zones (EPZs) initially. Over time, the sector has expanded its service range. Dhaka Bank PLC secured early offshore banking licenses among the local private banks and currently operates two Offshore Banking Units (OBU) to provide full-fledged offshore banking services.

Recent reforms under the Offshore Banking Act 2024 and Bangladesh Bank's FE Circular 19 aim to attract deposits and investment from non-residents (including NRBs) by offering high interest rates and tax exemptions on interest income. These changes aim to address the country's recent foreign currency crisis. Even residents can now open accounts on behalf of non-residents. Balance in offshore account can be transferred to onshore accounts for necessary payments and investments.

This strategic move could alleviate foreign currency challenges, stimulate economic growth and boost GDP, but requires careful management of risks like money laundering and tax evasion. Effective planning, robust regulation and adherence to international standards are critical for success.

A relevant example is Pakistan's Roshan Digital Account (RDA) initiative, which successfully attracted foreign currency inflows and bolstered their foreign exchange reserves. Bangladesh can achieve similar benefits through prudent implementation and risk mitigation strategies.

The Offshore Banking Act 2024 and related central bank circular have addresses some key offshore banking aspects like allowing high interest rates to depositors, exemption of taxes on interest income and confidentiality of information, fulfilling the primary requirements to become an offshore destination. It also permits deposits in nine foreign currencies, offering clients currency diversification options.

However, to make Bangladesh's offshore banking competitive globally, a clearer framework for asset protection and easier access of account holders to the international financial markets for investment and fund management should be established.

The new law in Bangladesh has exempted the depositors from taxes on interest income, effectively positioning the country as a 'Tax Haven' for offshore banking. However, alongside these tax advantages, ensuring financial privacy remains crucial. Under the law, domestic banks are required to obtain regulator's permission before disclosing any information about any depositor. It is important to note that Bangladesh has entered into inter-government agreements with various countries, such as 'Participation Agreement' with 'Internal Revenue Service (IRS)' of the US government (FATCA declaration) to promote transparency in the global financial services sector. These agreements underscore the balance between tax advantages and regulatory compliance that Bangladesh aims to maintain in its offshore banking sector.

To penetrate the global market, it's not enough to rely solely on liberalizing offshore banking regulations, offering lucrative tax-free interest income and reputation of individual banks. Other crucial factors include the country's overall reputation, economic stability, and the condition of the banking industry. These elements will collectively present Bangladesh as a viable offshore destination.

Ratings from agencies like Moody's or Fitch are crucial for governments, investors and businesses to assess a country's economic health and stability. A positive rating is essential for Bangladesh's aspirations to become a new offshore banking hub. However, recent downgrades by Moody's and Fitch may have limited impact on customer confidence since many countries in the world faces same kind of degradation amidst global financial turbulence due to the recent pandemic and conflicts.

Improving the country rating and enhancing corporate governance within the banking sector are imperative. Even non-resident Bangladeshis might be hesitant to put their savings in Bangladesh if we fail to do so. Proactive measures and collaborative efforts among stakeholders are essential to boost confidence of potential customers, especially amidst current banking sector challenges. Without addressing these issues, promoting offshore banking facilities in Bangladesh will be challenging.

Dhaka Bank PLC has extensive experience in delivering offshore banking services. It not only catering customers in EPZs but also tried to contribute to the development of country's power sector and manufacturing industries. In the realm of syndicated finance, Dhaka Bank's OBUs have facilitated the establishment of new power stations by offering low-cost finance. Additionally, we have extended long-term financing from our offshore banking to new manufacturing industries, thereby fostering industrial growth in Bangladesh. We provide short-term post-export finance by discounting export bills, helping exporters manage import liabilities during currency crises. This ensures uninterrupted export operations and foreign currency earnings. Eligible importers can also access post-import finance via buyers' credit for domestic raw material and commodity needs.

In response to new regulations, the bank has realigned its offshore banking deposit product lineup, now offering products like OBU Savings Account, OBU Term Deposit Account and OBU International Banking Account. These products not only offer competitive interest rates tied to benchmark reference rates but also include additional benefits which will attract customers. Our digital platform facilitates easy account opening procedures, enabling global accessibility. We are promoting our products through various mediums to attract potential customers with our reputation and service excellence.

But to achieve global success, all banks in Bangladesh need to collaborate. Extensive promotion inside and outside the country is crucial, with road shows in potential countries. Bangladesh's embassies in different countries may play an important role by promoting Bangladesh as a new offshore banking destination.

So far, we have received positive responses from different ends, with many non-resident Bangladeshis expressing interest in learning more about our facilities and showing enthusiasm for placing their savings in Dhaka Bank's offshore banking account. Additionally, few foreign investors have shown interest in investing in our bank. Several accounts have already been opened, and more are expected shortly, reflecting momentum in deposit collection.

For more information, please visit our website at www.dhakabankltd.com/obu , where visitors can explore our facilities and easily open an account online.

It is important to provide the customer with easy accessibility to their account and flexibility in account usage since the customers are located outside the country. In this aspect, it would be advantageous if the customer can access their funds from anywhere in the world using ATMs, net banking, and smartphone apps. This approach aligns with Bangladesh's vision of becoming a "Digital & Smart Bangladesh". Currently, domestic banks more or less are providing these types of facilities to their customers. We are closely working on expanding these type of facilities so that our customers can get full benefit from it.