Module: | MODULE A: INTERNATIONAL BANKING
Q212: Consider the following statements regarding the regulatory obligations and permissible activities of Banking Units operating within the International Financial Services Centre:
Statement 1: These Banking Units are completely exempt from maintaining the standard domestic Cash Reserve Ratio and Statutory Liquidity Ratio on their foreign currency deposit liabilities.
Statement 2: These Banking Units are permitted to open standard retail savings bank accounts and current accounts in freely convertible foreign currencies for any individual who resides in the domestic area of India.
Which of the statements given above is or are INCORRECT?
Statement 2: These Banking Units are permitted to open standard retail savings bank accounts and current accounts in freely convertible foreign currencies for any individual who resides in the domestic area of India.
Which of the statements given above is or are INCORRECT?
✅ Correct Answer: B
The question asks to identify the incorrect statement.
Statement 1 is a correct statement.
Banking Units operate strictly outside the domestic regulatory purview regarding reserve requirements; therefore, they are exempt from maintaining the Cash Reserve Ratio and the Statutory Liquidity Ratio on their foreign currency liabilities, allowing them to lend at highly competitive global interest rates.
Statement 2 is the incorrect statement.
Banking Units operate primarily in the wholesale and offshore banking domain.
They are strictly prohibited from opening standard retail savings or current accounts for general residents of India.
While domestic residents are permitted to open specific accounts solely for the purpose of investing in foreign securities under the Liberalised Remittance Scheme, offering general day-to-day retail banking facilities to the domestic public is barred.
Statement 1 is a correct statement.
Banking Units operate strictly outside the domestic regulatory purview regarding reserve requirements; therefore, they are exempt from maintaining the Cash Reserve Ratio and the Statutory Liquidity Ratio on their foreign currency liabilities, allowing them to lend at highly competitive global interest rates.
Statement 2 is the incorrect statement.
Banking Units operate primarily in the wholesale and offshore banking domain.
They are strictly prohibited from opening standard retail savings or current accounts for general residents of India.
While domestic residents are permitted to open specific accounts solely for the purpose of investing in foreign securities under the Liberalised Remittance Scheme, offering general day-to-day retail banking facilities to the domestic public is barred.