Funds parked by Indian individuals and firms in Swiss banks, including through India-based branches and other financial institutions, declined by 11 per cent in 2022 to 3.42 billion Swiss francs (nearly Rs 30,000 crore), annual data from Switzerland's central bank showed on Thursday. The decline in aggregate funds of Indian clients with Swiss banks, from a 14-year-high of CHF 3.83 billion in 2021, follows two consecutive years of increase and was largely driven by a sharp plunge of nearly 34 per cent in customer deposit accounts from a seven-year high.
These are official figures reported by banks to the SNB and do not indicate the quantum of the much-debated alleged black money held by Indians in Switzerland. These figures also do not include the money that Indians, NRIs or others might have in Swiss banks in the names of third-country entities. The total amount of CHF 3,424 million, described by the SNB as 'total liabilities' of Swiss banks or 'amounts due to' their Indian clients at the end of 2022, included CHF 394 million in customer deposits (down from CHF 602 million at 2021-end), CHF 1,110 million held via other banks (down from 1,225 million), CHF 24 million (up from CHF 3 million) through fiduciaries or trusts, and the highest component of CHF 1,896 million (down from 2,002 million) as 'other amounts due to customers in form of bonds, securities and various other financial instruments.
The total amount stood at a record high of nearly 6.5 billion Swiss francs in 2006, after which it has been mostly on a downward path, except for a few years including in 2011, 2013, 2017, 2020 and 2021, as per the Swiss National Bank (SNB) data. While all four components had declined during 2019, the year 2020 saw a significant plunge in customer deposits, while there was a surge across all categories in 2021. During 2022, only the fiduciaries segment saw an increase. According to the SNB, its data for 'total liabilities' of Swiss banks towards Indian clients takes into account all types of funds of Indian customers at Swiss banks, including deposits from individuals, banks and enterprises. This includes data for branches of Swiss banks in India, as also 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 over 18 per cent during 2022 in such funds to USD 94.4 million (Rs 781 crore). It had dropped by over 8 per cent in 2021, after rising by nearly 39 per cent in 2020. 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 per cent in 2019, after declining by 11 per cent in 2018 and by 44 per cent in 2017.
It peaked at over USD 2.3 billion (over Rs 9,000 crore) at the end of 2007. Swiss authorities have always maintained that assets held by Indian residents in Switzerland cannot be considered as 'black money' and they actively support India in its fight against tax fraud and evasion. An automatic exchange of information in tax matters between Switzerland and India has been in force since 2018. Under this framework, detailed financial information on all Indian residents having accounts with Swiss financial institutions since 2018 was provided for the first time to Indian tax authorities in September 2019 and this is to be followed every year.
In addition to this, Switzerland has been actively sharing details about accounts of Indians suspected to have indulged in financial wrongdoings after the submission of prima facie evidence. Such exchange of information has taken place in hundreds of cases so far. The overall funds of foreign clients, including of institutions, declined to CHF 1.15 trillion (over Rs 125 lakh crore) in 2022. In terms of assets, Indian clients accounted for CHF 3.99 billion at the end of 2022, marking a decline of nearly 15 per cent. This included dues from Indian customers worth about CHF 164 million, which almost halved from CHF 323 million at the end of 2021.
While the UK topped the charts for foreign clients' money in Swiss banks at CHF 309 billion, it was followed by the US (CHF 133 billion) at the second spot -- the only two countries with 100-billion-plus client funds. These two were followed in the top 10 by West Indies, France, Germany, Hong Kong, Singapore, Luxembourg, Bahamas and the Netherlands. UAE, Guernsey, Cyprus, Italy, Australia, Jersey, Cayman Islands, Russia, Japan, Panama, Spain, Taiwan, Saudi Arabia, China and Israel joined them in top-25.
India was placed at 46th place, down from 44th a year ago, ahead of countries like South Korea, Sweden, Argentina, Bahrain, Oman, New Zealand and Mauritius and Pakistan, which also saw a sharp dip to CHF 427 million (from CHF 712 million). Bangladesh also saw a sharp plunge from CHF 871 million to CHF 55 million.
Just like in India, the issue of alleged black money in Swiss banks has been a political hot potato in the two neighbouring countries as well. After the annual data release in 2021, the Indian government had sought details from Swiss authorities on the relevant facts along with their view on possible reasons for changes in the funds parked by individuals and entities that year. In its statement, the Finance Ministry had said then that 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 that year, 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. Besides, capital increase for a subsidiary of a Swiss company in India and increase in the liabilities connected with the outstanding derivative financial instruments could be the other potential reasons for this jump in deposits, the ministry had explained. It also said that exchanges of financial account information in respect of residents of each country have been taking place and there did not appear to be any significant possibility of the increase of deposits in the Swiss banks which is out of undeclared incomes of Indian residents.
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