Money Parked by Indians in Swiss banks hit record low

According to the data released by Zurich-based SNB, money parked by Indians in Swiss banks have nearly halved to 676 Swiss francs (about Rs. 4,500 crore) in 2016. The data release comes ahead of a new framework for the automatic exchange of information between Switzerland and India to check the menace of black money.  SNB (Swiss National Bank) is Switzerland’s central banking authority

Salient Highlights

During 2016, the total money held by Indians fell by 45 % to stand at CHF 675.75 million. This is the biggest ever yearly decline in such funds. Out of the total funds, CHF 377 million was in the form of customer deposits, about CHF 98 million owed to Indians through other banks and CHF 190 million constitutes other ‘liabilities’. The funds reported in 2016 is the lowest amount of funds possessed by Indians in the Swiss banks ever since 1987 and marks the third straight year of decline. Apart from this year, since 1987, the earlier lowest ever figure was recorded in 1995 at CHF 723 million.
On the other hand, the funds held through fiduciaries was nearly $11 million. These funds which used to be in billions till 2007 has been falling since then due to the regulatory crackdown. Similarly, the funds held by Indians with Swiss banks was CHF 6.5 billion (Rs 23,000 crore) at 2006-end. But at present, the funds have come down to nearly one-tenth of that level. Except in 2011 and 2013, the quantum of funds held by Indians has seen a decline.
Swiss banks have said that Indians have parked their money in other global financial hubs like Singapore and Hong Kong after a global clampdown was initiated on the mighty banking secrecy practices in Switzerland.

Background

In November 2016, India and Switzerland had signed a Joint Declaration for implementation of Automatic Exchange of Information (AEOI) in respect of accounts of Indians held abroad. Under the pact, both countries will start collecting data in accordance with the global standards in 2018 and exchange it from 2019 onwards.
Switzerland agreed for the introduction of the AEOI (Automatic Exchange of information) on tax matters under the guidance of G20, OECD and other global organisations. AEOI, based on Common Reporting Standards, when implemented fully would put in place a system wherein bulk taxpayer information will be sent periodically from the source country of income to the country of residence of the taxpayer. It would enable India to get access to information virtually from almost all the countries in the world including offshore financial centres.
In June 2017, Switzerland has ratified automatic exchange of financial account information with India and 40 other countries. This will facilitate Switzerland to share information about suspected black money with India and other 40 nations.

Month: Current Affairs - June, 2017