Finance Ministry Responds to Black Money Allegations in Swiss Banks

Finance Ministry Addresses Allegations of Black Money in Swiss Banks

In response to recent media reports dated June 18, 2021, regarding the rise of Indian funds in Swiss banks, the Finance Ministry has issued a clarification. The reports suggest that Indian deposits surged to over Rs 20,700 crore (CHF 2.55 billion) at the end of 2020, compared to Rs 6,625 crore (CHF 899 million) at the end of 2019, marking a notable increase after two years of decline. This figure reportedly represents the highest level of deposits recorded in the last thirteen years.

The media claims the stated amounts are official figures submitted by banks to the Swiss National Bank (SNB). It is important to note that these figures do not reflect any alleged black money attributed to Indians in Switzerland, nor do they account for funds held under third-country entities by Indians or non-resident Indians (NRIs).

Contrary to media assertions, actual customer deposits have decreased since the end of 2019. Additionally, funds managed through fiduciaries have halved during the same period. The most significant increase observed pertains to "Other amounts due from customers," which include various financial instruments such as bonds and securities.

India and Switzerland are participants in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC) and the Multilateral Competent Authority Agreement (MCAA), initiating the Automatic Exchange of Information (AEOI) for sharing financial account data annually, starting from the calendar year 2018.

The exchange of financial account information concerning residents of both countries already took place in 2019 and 2020. Given the robust legal framework for information exchange, which plays a crucial role in deterring tax evasion related to undisclosed assets abroad, it is unlikely that increases in Swiss bank deposits can be attributed to undeclared income from Indian residents.

Several factors may account for the increase in reported deposits:

1. Rise in deposits by Indian companies in Switzerland due to heightened business activity.
2. Growth in deposits linked to operations of Swiss Bank branches situated in India.
3. Expansion of inter-bank transactions between Swiss and Indian financial institutions.
4. Capital increases for subsidiaries of Swiss companies operating in India.
5. Growth in liabilities related to outstanding derivative financial instruments.

To further investigate these claims, the Finance Ministry has reached out to Swiss authorities for factual details and insights regarding potential reasons behind the increases or decreases in deposits as highlighted in media reports.