Chinese model for SEZ offshore bank branches

NEW DELHI: After low-priced consumer goods and chemicals, banking regulations are to be imported into the country from China.
The finance ministry and Reserve Bank are studying the Chinese model for regulating the much-awaited ‘offshore’ bank branches in special economic zones.
Since the commerce department had planned the SEZs on the Chinese model, it is going to be the Dragon all over.
According to highly-placed finance ministry sources, a peculiar aspect of the proposed ‘offshore’ banking facilities at SEZs came up during re-cent discussions. The original plan was to treat these branches as over-seas branches of Indian banks.
In such cases, Indian banking regula-tions do not apply but the branch has to follow the norms prescribed by the apex bank of the country concerned. For example, the branch of an Indian bank located in London would follow Bank of England guidelines.
In case of SEZs, the branches will be located within the country. So if they were to be exempt RBI norms, whose regulations will they follow? Then it was realised that a separate set of comprehensive guidelines are necessary and it was not a simple case of equating the proposed SEZ branches as overseas branches of Indian banks.
After looking at various models, finance ministry and RBI zeroed in on Chinese model. China allows a free hand to banks in SEZs but strict guidelines are in place to regulate capital outflows and repatriation of profits.