Port City Colombo announced this week that the parliament passed two key regulations on offshore banking on September 4, 2024, marking a major step in the city’s bid to become a regional financial hub. 

The ‘Offshore Banking’ and ‘Offshore Banking – Prudent Management and Confidence’ aim to attract more Foreign Direct Investment (FDI) into the country.

Currently, seven local banks and three international banking corporations are in talks to establish offshore banking branches in the Colombo Port City Special Economic Zone.

Six local banks, including Commercial Bank of Sri Lanka, Sampath, HNB, DFCC, NDB, and NTB, have been approved as Authorised Persons by the Colombo Port City Economic Commission (CPCEC). These branches, expected to operate under the newly passed regulations initially gazetted on July 26, 2024, will be directly supervised by the Central Bank of Sri Lanka and the Financial Intelligence Unit, reinforcing investor confidence 
in the project.

The regulations offer a variety of benefits for investors interested in setting up offshore banking operations. These include the ability to conduct transactions in foreign currencies, accept deposits from non-residents, extend loans in foreign currencies, and engage in other approved transactions. These operations will also be subject to approval by the CPCEC and 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,” Port City Colombo said in a statement to the media.

It added that 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 percent capital and profit repatriation, 100 percent foreign ownership, and so forth.