Port City Colombo announced that the two gazetted regulations, Offshore Banking and Offshore Banking -- Prudent Management and Confidence, were officially passed by the Parliament of Sri Lanka on 4th September 2024. This milestone represents Port City Colombo’s ambitious aim to position itself as a formidable regional financial centre, which would attract an increased inflow of Foreign Direct Investments into Sri Lanka.
As of date, seven local banks and three international banking corporations are in discussion to set up offshore banking branches within the area of authority of the Colombo Port City Special Economic Zone. Six local banks, including the Commercial Bank of Sri Lanka, Sampath, HNB, DFCC, NDB, and NTB, have additionally been approved as Authorised Persons (AP’s) by the Colombo Port City Economic Commission (CPCEC). The commercial operations of the offshore banking branches at Port City Colombo will be governed by the aforementioned regulations, which were initially gazetted on 26th July 2024. These branches will also operate under the direct supervision and oversight of the Central Bank of Sri Lanka and the Financial Intelligence Unit, which further reinforces the growing investor confidence in Port City Colombo as a regional investment hotspot.
Being a foundational regulatory framework that underpins Port City Colombo’s progressive financial environment, the offshore banking regulations provides prospective investors exploring business set-up opportunities a diversity of attractive offshore banking benefits. These encompass direct transactions in any designated foreign currency with any other offshore banking unit or non-resident; the acceptance of savings, time and demand deposits from any Authorised Person or a non-resident in any designated foreign currency; extension of accommodation to any non-resident in any designated foreign currency; borrow any sum in a designated foreign currency from any non-resident; and engage in any other transactions authorised by the Colombo Port City Economic Commission with the concurrence of the Central Bank of Sri Lanka.
The offshore banking regulations will facilitate the development of a thriving international banking ecosystem at Port City Colombo, which will be a precursor for other financial products, such as stock trading and fund management. Enabling higher transactional efficiencies and more fortified exchange of securities, these regulations will allow businesses to draw on their capital strength. Companies specialising in the export of services would also experience greater flexibility and reliability in terms of foreign currency transactions, which will act as a retainer of foreign currency within the country. The presence of offshore branches of international banks would promote greater financial stability and provide the dexterity to invest in large-scale projects for prospective global investors. Further, the offshore banking system at Port City Colombo will foster the creation of a circular financial economy, due to the increased circulation of foreign currency. The regulations will also augment the Colombo Port City Special Economic Zone’s fiscal and non-fiscal incentives, which include attractive tax exemptions for 25 plus years, 100% capital and profit repatriation, 100% foreign ownership, and so forth.
With the aim of becoming a competitive offshore economy and a prime business destination, Port City Colombo demonstrates its readiness for operationalised commercial activity.