Surge in securities, institutional holdings take deposits in Swiss banks to a 14-year-high
New Delhi: Annual data from Switzerland’s central bank showed that funds parked by Indian individuals and firms in Swiss banks, including through India-based branches and other financial institutions, jumped to a 14-year high of 3.83 billion Swiss francs (over Rs 30,500 crore) in 2021, thanks to a sharp increase in holdings via securities and similar instruments, while customer deposits also increased.
The increase in aggregate funds held by Indian clients with Swiss banks, from 2.55 billion Swiss francs (₹20,700 crore) at the end of 2020 to 2.55 billion Swiss franc (₹20,700 crore) at the end of 2021, is the second consecutive increase.
Furthermore, the amount of money in Indian clients’ savings or deposit accounts increased to a seven-year high of around 4,800 crore, reversing a two-year downward trend.
At the end of 2021, the Swiss National Bank (SNB) reported CHF 3,831.91 million in “total liabilities” of Swiss banks or “amounts due to” their Indian clients, which included CHF 602.03 million in customer deposits (up from CHF 504 million at the end of 2020), CHF 1,225 million held by other banks (up from CHF 383 million), and CHF 3 million held by fiduciaries or trusts (up from CHF 2 million).
‘Other amounts payable to clients’ in the form of bonds, securities, and various other financial instruments had the greatest component of CHF 2,002 million (up from CHF 1,665 million).
According to SNB data, the total sum reached a record high of about 6.5 billion Swiss francs in 2006, after which it has largely been on a declining trend, save for a few years in 2011, 2013, 2017, 2020, and currently in 2021.
While all four components fell in 2019, the year 2020 witnessed a large drop in consumer deposits, while the year 2021 experienced an increase in all categories.
These are official data provided to the SNB by banks and do not reflect the amount of alleged black money held by Indians in Switzerland. These figures also exclude any funds held in Swiss banks in the names of third-country businesses by Indians, NRIs, or others.
According to the SNB, its data on Swiss banks’ “total liabilities” to Indian clients includes all forms of funds held by Indian customers with Swiss banks, including deposits from people, banks, and businesses. This covers information about Swiss bank branches in India as well as non-deposit liabilities.
On the other hand, the ‘locational banking statistics’ of the Bank for International Settlement (BIS), which have been described in the past by Indian and Swiss authorities as a more reliable measure for deposits by Indian individuals in Swiss banks, showed a decline of 8.3% during 2021 in such funds to $115.5 million (₹927 crore at current exchange rates), after rising by nearly 39% during 2020 to $125.9 million (₹932 crore).
This figure takes into account deposits as well as loans of Indian non-bank clients of Swiss-domiciled banks and had shown an increase of 7% in 2019, after declining by 11% in 2018 and by 44% in 2017. It peaked at over $2.3 billion (over ₹9,000 crore) at the end of 2007.
Swiss authorities have consistently maintained that assets owned by Indian residents in Switzerland are not ‘black money,’ and they actively support India in its fight against tax fraud and evasion.
Since 2018, there has been an automated exchange of information on tax cases between Switzerland and India. Under this approach, full financial information on all Indian residents who have accounts with Swiss financial institutions since 2018 was sent to Indian tax authorities for the first time in September 2019 and will be done every year thereafter.
Furthermore, upon the filing of prima facie evidence, Switzerland has been actively disclosing details regarding accounts of Indians accused of financial wrongdoings. This type of information exchange has occurred in hundreds of situations so far.
In terms of assets (or funds due from customers), Indian clients accounted for CHF 4.68 billion at the end of 2021, up nearly 10%. This included dues from Indian customers worth about CHF 323 million after a rise of 25% during the year.
While the United Kingdom topped the charts for foreign clients’ money in Swiss banks at CHF 379 billion, it was followed by the US (CHF 168 billion) at the second spot — the only two countries with 100-billion-plus client funds.
Others in the top 10 were West Indies, Germany, France, Singapore, Hong Kong, Luxembourg, Bahamas, the Netherlands, Cayman Islands and Cyprus.
India was placed at 44th place, ahead of countries like Poland, South Korea, Sweden, Bahrain, Oman, New Zealand, Norway, Mauritius, Bangladesh, Pakistan, Hungary and Finland.
Among BRICS nations, India stood below Russia (15th place) and China (24th), but above South Africa and Brazil.
Others placed above India included the UAE, Australia, Japan, Italy, Spain, Panama, Saudi Arabia, Mexico, Israel, Taiwan, Lebanon, Turkey, Austria, Ireland, Greece, Bermuda, Marshall Islands, Liberia, Belgium, Malta, Canada, Portugal, Qatar, Egypt, Thailand, Kuwait and Jordan.
Pakistan saw an increase in funds of its citizens and enterprises to CHF 712 million, while that for Bangladesh rose to CHF 872 million.
The subject of supposed black money in Swiss banks has been a political hot potato in both countries, just as it has been in India.
Following the publication of the annual data last year, the Indian government requested information from Swiss authorities on the pertinent facts as well as their opinion on possible reasons for changes in the monies parked by people and businesses in 2020.
In its statement, the finance ministry had said the figures “do not indicate the quantum of much-debated alleged black money held by Indians in Switzerland. Further, these statistics do not include the money that Indians, NRIs or others might have in Swiss banks in the names of third-country entities.” It had also listed out the reasons that could have led to the increase in deposits, including rising business transactions by Indian companies, rise in deposits owing to the business of Swiss bank branches located in India and increase in inter-bank transactions between Swiss and Indian banks.
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