OFFSHORE BANKING

DECLARATION BY LEARNER

I the undersigned Miss CHINMAYEE NAGVEKAR hereby

declare that the work embodied in this project work titled

AN ANALYTICAL STUDY ON THE ROLE OF OFFSHORE BANKING

forms my own contribution to the research work carried out under the guidance of

DR SAUMITRA SAWANT is a result of my own research work and has

not been previously submitted to any other University for any other Degree/Diploma

to this or any other University.

Wherever reference has been made to previous works of others. It has been clearly

indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained it

has been obtained and presented in accordance with academic rules and ethical conduct

CHINMAYEE NAGVEKAR
Signature

Certified by
DR. SAUMITRA SAWANT
signature

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SYDENHAM COLLEGE OF COMMERCE AND ECONMICS

-400020
(COMMERCE)

CERTIFICATE
This is to certify that Ms CHINMAYEE NAGVEKAR has
worked and duly completed her/his Project work for the degree of Master of Commerce

under the Faculty of Commerce in the subject of ADVANCED ACCOUNTANCY and

her/his project is entitled AN ANALYTICAL STUDY ON THE ROLE OF OFFSHORE

under my supervision. I further certify that the entire work has been done by the learner
under my guidance and that no part of it has been submitted previously for any degree or
diploma of any University.
It is her/his own work and facts reported by her/his personal findings and
investigations

SAUMITRA SAWANT
Seal of the College Signature of Research Guide

Date of Submission
2/1/22

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ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is

so enormous.

I would like to acknowledge the following as being idealistic channels and fresh

dimensions in the completion of this project.

I take this opportunity to thank Dr. Homi Bhabha State University of Mumbai for

giving me the chance

to do this project.

I would like to thank my Principal, MADHURI KAGALKAR for providing the

necessary facilities required for completion of this project.

I take this opportunity to thank our DR.KHUSHPAT JAIN Head, Department of Commerce,

for his moral support and guidance.

I would also like to express my sincere gratitude towards my project

guide DR. SAUMITRA SAWANT whose guidance and care made the project successful

I would also like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly

helped me in the completion of the project especially my Parents and Peers who

supported me throughout my project.

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PREFACE

It is a great opportunity for me to be studying MASTER OF COMMERCE from Sydenham College

of Commerce and Economics. In the accomplishment of this Degree I am submiting the project on an
analytical study on the role of Offshore Banking Services To Mumbai.

Subject to the limitation of time efforts every possible attempt has been made to study the problem
deeply. The whole project is measured through the questionnaire, data further analyzed and
interpreted and the result was obtained.

The project is been divided into Introduction, Methodology and Questionnairre.

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CHAPTER 1

1.1 INTRODUCTION OF BANKING

1.1.1 BANKING

A bank is a financial institution licensed to receive deposits and make loans.

Two of the most common types of banks are commercial/retail and investment banks.

Depending on type, a bank may also provide various financial services ranging from

providing safe deposit boxes and currency exchange to retirement and wealth management.

In the United States of America banks are regulated by the U.S. Federal Reserve Bank

which is one of the world's major central banks. Above all, central banks are responsible

for currency stability. They control inflation, dictate monetary policies, and oversee

money demand and supply in the market. Commercial or retail banks offer

various services including, but not limited to, managing money deposits and

withdrawals, providing basic checking and saving accounts, certificates of deposit,

issuing debit and credit cards to qualified customers, supplying short-and long-term l

oans such as car loans, home mortgages or equity line of credits. Investment banks gear

their services toward corporate clients. They provide services such as merger and

acquisition activity and underwriting among other investment services.

DEFINITION OF BANKING- Banking can be defined as the business activity of

accepting and safeguarding money owned by other individuals and entities and then
lending out this money in order to earn a profit.

DEFINITION OF OFFSHORE BANKING 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.

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Development involves not merely economic changes but also social and industrial in many
underdeveloped countries call for new sets of values and new concepts of society and
government. No path to development is likely to be smooth. Banking is the base for economic
development.

A bank is a financial institution that accepts deposits from the public and creates credit. Lending
activities can be performed either directly or indirectly through capital markets. Due to their
importance in the financial stability of a country, banks are highly regulated in most countries.
Most nations have institutionalized a system known as fractional reserve banking under which
banks hold liquid assets equal to only a portion of their current liabilities. In addition to other
nations has significant positive externalities which increase the efficiency of economic
transaction in general. There is a major shift in banking system in the policy atmosphere after
the introduction of financial sector reform in 1992; these reforms impact the working of
commercial banks. As one of the objectives of financial sector reform was to improve the
efficiency of banking system in India economy.

The financial system's contributes to the economy depends upon the quantity and quality of its
service and efficiency with which it provides them Financial System of any country consists of
Financial markets, financial intermediation and financial instruments or financial products. The
term "finance". The word "system", in the term "financial system", implies a set of complex
and closely connected or interlined institutions, agents, practices, markets, transactions, claims,
econo. The financial system is concerned about money, credit, and finance-the three terms are
intimately related yet are somewhat different from each other. Indian financial system consists
of financial market, financial instruments, and financial intermediation. A Financial Market can
be defined as the market in which financial assets are created or transferred. As against a real
transaction that involves exchange of money for real goods or services, a financial transaction
involves creation or transfer of a financial asset. It consist of market for government securities,
corporate securities, foreign exchange, derivate, short term finance or money market and capital
market etc. Market for different types of financial instruments may be organized like stock
exchange with centralized trading or informally as the over-the counter market. Financial
Assets or Financial Instruments represents a claim to the payment of a sum of money sometime
in the future and or periodic payment in the form of interest or dividend.

A financial system provides services that are essential in a modern economy. The use of a
stable, widely accepted medium of exchange reduces the costs of transactions. It facilitates

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trade and, therefore, specialization in production. Financial assets with attractive yield,
liquidity and risk characteristics encourage saving in financial form. By evaluating
alternative investments and monitoring the activities of borrowers, financial intermediaries
increase the efficiency of resource use. Access to a variety of financial instruments enables
an economic agent to pool, price and exchange risks in the markets. Trade, the efficient use
of resources, saving and risk taking are the cornerstones of a growing economy. In fact, the
country could make this feasible with the active support of the financial system. The
financial system has been identified as the most catalysing agent for growth of the economy,
making it one of the key inputs of development.

Since independence, the Banking Sector has witness significant changes and has surely come
a long way from the nationalization and privatization in the post-1997 era. The last two
decade has brought about significant changes in the Banking area in the country with
technology being a major facilitator of this transformation. ATMs, Internet Banking, CCs,
and now Mobile Banking have helped revolutionize the Banking landscape in the country.
The old concepts, attitudes and methods in Banking have yield place to new techniques of
viability, need base finance and marketing. Instead of the Banks merely moving with the
slope into immediately profitable ventures, they are required to participate in the nation
building activities and help in bringing about socio-economic changes. Banks are not only
financial institutions those mobilize funds from one to another but as social organizations,
have to go out the people and assist weaker sections in achieving their aspirations.

Banks are, thus, to act as catalytic agents for the development of the country, mobilizing
resources whether these are and canalizing them towards productive persons. New strategies
have to be involved for industrial development, both in small scale and large-scale sectors
and, rather than confining to the traditional way of

Strong and distribution finance of a short nature, developmental finance and term lending
have to be taken up by commercial Banks. Similarly opening of branches in Rural and Urban
area efficient customer services have assumed great importance.

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1.1.2 ORIGIN OF THE WORD BANK

There seems no uniformity amongst the economist about the origin of the word Bank
According to some authors the word Bank, itself is der
s
on benches in the market place, when, a banker failed, his Banco p by the
people; it was called d by McLeod on the
ground that, The Italian Money changers as such were never called Banchier in the middle

of 12th century there was a great financial crisis in Italy due to war. To meet the war
expenses, the government of that period a forced subscribed loan on citizens of the country
at the interest of 5% per annum. Such loans were known as 'Compare', 'minto' etc. The most
. In Germany the word 'Monte was named as 'Bank' or 'Banke'.
According to some writers, the word 'Bank' has been derived from the word bank.

It is also said that the word 'bank' has been derived from the word 'Banco' which means a
bench. The Jews money lenders in Italy used to transact their business sitting on benches at
different market places. When any of them used to fail to meet his obligations, his 'Banco'
or banch or bench would be broken by the angry creditors. The word 'Bankrupt' seems to be
originated from broken Banco. Since, the banking system has been originated from money
leading business; it is rightly argued that the word 'Bank' has been originated from the word
"Banco'. Whatever be the origin of the word Bank as Professor Ram Chandra Rao says, it
would trace the history of banking in Europe from the middle Ages.

Actually meaning of bank is not specifies in any regulation or act. In India, different people
have different type of meaning for bank. Normal salary earner knows means of bank that it
is a saving institution, for current account holder or businessman knows bank as a financial
institutions and many other. Bank is not for profit making, it creates saving activity in salary
earner.

1.1.3 MEANING OF BANK

Finance is the life blood of trade, commerce and industry. Now-a-days, bank money acts as
the backbone of modern business. Development of any country mainly depends upon the
banking system.

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The term bank is derived from the French word banco which means a bench or money
exchange table. In olden days, European money lenders or money changers used to display
(show) coins of different countries in big heaps (quantity) on benches or tables for the
purpose of lending or exchanging.

A bank is financial institution which deals with deposits and advances and other related
services. It receives money from those who want to save in the form of deposits and it lends
money to those who need it.

1.1.4 HISTORY OF BANKING

The concept of banking may have begun in ancient Assyria and Babylonia, with merchants
offering loans of grain as collateral within a barter system. Lenders in ancient Greece and
during the Roman Empire added two important innovations: they accepted deposits and
changed money. Archaeology from this period in ancient China and India also shows
evidence of money lending.

More modern banking can be traced to medieval and early Renaissance Italy, to the rich
cities in the centre and north like Florence, Lucca, Siena, Venice and Genoa. The Bardi and
Peruzzi families dominated banking in 14th-century Florence, establishing branches in many
other parts of Europe. One of the most famous Italian banks was the Medici Bank, set up by
Giovanni di Bicci de' Medici in 1397. The earliest known state deposit bank, Banco di San
Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy.

Modern banking practices, including fractional reserve banking and the issue of banknotes,
emerged in the 17th and 18th centuries. Merchants started to store their gold with the
goldsmiths of London, who possessed private vaults, and charged a fee for that service. In
exchange for each deposit of precious metal, the goldsmiths issued receipts certifying the
quantity and purity of the metal they held as a Bailee; these receipts could not be assigned,
only the original depositor could collect the stored goods.

Gradually the goldsmiths began to lend the money out on behalf of the depositor, which led
to the development of modern banking practices; promissory notes (which evolved into
banknotes) were issued for money deposited as a loan to the goldsmith. The goldsmith paid
interest on these deposits. Since the promissory notes were payable on demand, and the
advances (loans) to the goldsmith's customers were repayable over a longer time period, this
was an early form of fractional reserve banking. The promissory notes developed into an

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assignable instrument which could circulate as a safe and convenient form of money backed
by the goldsmith's promise to pay, allowing goldsmiths to advance loans with little risk of
default. Thus, the goldsmiths of London became the forerunners of banking by creating new
money based on credit.

The Bank of England was the first to begin the permanent issue of banknotes, in 1695. The
Royal Bank of Scotland established the first overdraft facility in 1728. By the beginning of
the 19th century a bankers' clearing house was established in London to allow multiple banks
to clear transactions. The Rothschilds pioneered international finance on a large scale,
financing the purchase of the Suez Canal for the British government.

1.1.5 BANKING IN THE PRE-INDEPENDENCE PERIOD

The banking in India has its origin from Vedic times. Rina (debt) is often mentioned in
Rigveda. According to the Central Banking Enquiry Committee (1931), money lending
activity in India traced back to the Vedic Period, i.e., 2000 to 1400 BC. The existence of
professional banking in
dating back to 400 BC contained references of creditors, lender and lending rates.
Mr.W.E.Preston, member, Royal Commission on Indian Currency and Finance set up in
1926 observed it may be accepted that a system of banking that was eminently suited to

banking became an accomplished fact in England. Aryans treated money lending as one of
the four honest callings, the other three being-tillage, trading and harvesting. In Sutra period
(Seventh to Second century of B.C), Jatakas (Buddist writings) had a mention of money
lending.

During 2nd to 5th centuries of A.D., the money lending was considered as most important for
economic development. The Kings followed the Kautilyas Arthasastra to regulate the
interest rates and laid down rules for creditors and debtors. The laws of Manu were also
conferred wide powers on the creditors for the recovery of debts. During this period, money
lenders were well controlled and regulated.

During 6th to 16th centuries, no significant changes were taken place in the indigenous
banking. During Moghul period, indigenous banking was very popular. These bankers were
very much affected with the passage of political power to Britishers. The first joint stock

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