Indian money in Swiss banks rise to over Rs 14,000 crore

Zurich/New Delhi: Indians' money in Swiss banks has risen to over two billion Swiss francs (nearly Rs 14,000 crore), despite a global clampdown against the famed secrecy wall of Switzerland banking system. The funds held by Indians with banks in Switzerland rose by over 40 per cent during 2013, from about 1.42 billion Swiss francs at the end of previous year, as per the latest data released on June 19 by the country's central banking authority Swiss National Bank (SNB).

In contrast, the money held in Swiss banks by their foreign clients from across the world continued to decline and stood at a record low of 1.32 trillion Swiss francs (about USD 1.56 trillion or over Rs 90 lakh crore) at the end of 2013. During 2012, the Indians' money in Swiss banks had fallen by over one-third to a record low level.

The total Indian money held in Swiss banks included 1.95 billion Swiss francs held directly by Indian individuals and entities, and another 77.3 million Swiss francs through 'fiduciaries' or wealth managers at the end of 2013. The latest data from Zurich-based SNB comes at a time when Switzerland is facing growing pressure from India and many other countries to share foreign client details, while its own lawmakers are resisting such measures.

India has also constituted a Special Investigation Team (SIT) to probe cases of alleged black money of Indians, including funds stashed abroad in places like Switzerland. The funds, described by SNB as 'liabilities' of Swiss banks or 'amounts due to' their their clients, are the official figures disclosed by the Swiss authorities and do not indicate towards the quantum of the much-debated alleged black money held by Indians in the safe havens of Switzerland. SNB's official figures also do not include the money that Indians or others might have in Swiss banks in the names of entities from different countries.

The Swiss National Bank said that the focus of banks in the country continues to shift away from foreign clients to domestic business, as reflected in the decline in their overall amounts due to overseas customers.

There are a total of 283 banks in Switzerland, down from nearly 300 at the beginning of 2013. This include two banks (UBS and Credit Suisse) classified as big banks, while there are 93 foreign-controlled banks operating in the country. A total of close to 1.25 lakh staff work at these banks. According to the SNB data, funds held by the US entities in Swiss banks also rose during 2013 -- from 189 billion Swiss francs to 193 billion Swiss francs -- despite a major crackdown by the American authorities against the Swiss banks.

However, a number of countries saw their exposure to Swiss banks decline during the year, resulting in the overall funds held by foreign clients in Switzerland's banking institutions decline to 1.32 trillion Swiss francs, from 1.39 trillion Swiss francs at the end of 2012. With regard to the money held by Indians in Swiss banks, it rose during 2013 after a sharp decline in 2012.

Prior to that, Indian money in Swiss banks had risen during 2011 also. The quantum of Indian funds in Swiss banks stood at a record high level of 6.5 billion Swiss francs at the end of 2006, but it declined by more than 4 billion Swiss francs after four straight years of fall till 2010.

For clients across the world, total funds in Swiss banks stood at a record high level of 2.9 trillion Swiss francs at the end of 2005, while the all-time high level in the US currency was recorded in 2007 at USD 2.4 trillion. Amid allegations of Indians stashing huge amounts of illicit wealth abroad, including in Swiss banks, the Indian government has been saying that it was making various efforts to bring back the unaccounted money.

While a new treaty has been put in place for sharing of information on issues related to tax crimes on a prospective basis, Switzerland has also agreed to a limited retrospective clause for such information exchange in case of India.

As per SNB data, funds held by Indians directly in the Swiss banks rose by over 600 million Swiss francs in 2013 to 1.95 billion Swiss francs (Rs 13,650 crore). On the other hand, the funds held through 'fiduciaries' fell marginally to 77.3 million Swiss francs (about Rs 550 crore) in 2013 -- marking the seventh straight year of fall. Fiduciaries are essentially wealth fund managers who hold the money of Indian private holders and families in the so-called numbered accounts.

The Swiss banks' direct liabilities towards clients from India include funds held in savings and deposit accounts by Indian individuals, financial institutions and corporates. The size of Swiss banks' assets in India, however, fell to 4.1 billion Swiss francs during 2013. However, the plunge was much higher at about two billion Swiss francs in 2012, after more than doubling in the previous year. The experts have been saying that there has been a "perceptible flight of funds" of Indian holders from Swiss banks to other places in the recent years.

At the same time, global pressure has been rising on Switzerland to ask its banks to share information about their clients with foreign governments. It is being suspected now that Indians having illicit wealth in Swiss banks may be moving their funds in fear of being exposed due to growing scrutiny. At the same time, even those having legitimate funds in Swiss banks may be moving away, due to a growing level of negativity attached to them.

Top financial regulators Sebi and RBI have already stepped up their vigil over Indian entities routing their funds from secretly-held Swiss bank accounts to India through other locations. Indians' direct exposure to Swiss banks stood at a record high level of about five billion Swiss francs in 2006, while the amount held through fiduciaries at that time was close to 1.5 billion Swiss francs.

While India has been stepping up pressure for data on alleged illicit funds parked in Swiss banks, Switzerland has said it cannot positively respond to requests which are beyond the ambit of bilateral tax treaty. The Swiss government's latest response came against the backdrop of former Finance Minister P Chidambaram shooting off numerous letters to his Swiss counterpart raising concerns about the Alpine nation denying information on alleged unaccounted money held by Indians in banks in Switzerland.

In the letter, Chidambaram had strongly objected to Switzerland's denial of information about account details of certain Indians at HSBC's Swiss bank branches, in whose cases "incriminating evidence of tax evasion" have been found. However, Switzerland is now moving closer to do away with banking secrecy practices. Last month, it started ground work for implementation of automatic exchange of information on tax matters with various countries including India.