Why are Swiss banks unique and why Rs. 37,000 crore from India sits in their vaults?

Indian-linked money deposited in Swiss banks rose sharply in 2024, tripling to CHF 3.54 billion Swiss francs (approximately ₹37,600 crore), according to the Swiss National Bank’s (SNB) annual report released on Thursday, June 19. This marks the highest level since 2021 and a significant rebound from 2023, when total funds had dropped by 70 per cent to CHF 1.04 billion.

Swiss banks are widely known for their financial stability, strict confidentiality (now reduced), and access to global markets. While the secrecy they once held, has now been diluted due to international regulatory agreements, these banks continue to attract deposits for wealth management, private banking, and corporate transactions, particularly through regulated financial channels.

The SNB figures presently represent total liabilities of Swiss banks toward Indian clients, including the direct customer deposits and funds through financial institutions. Out of the CHF 3.54 billion, only about CHF 346 million (around ₹3,675 crore) were direct customer deposits, which is a modest 11 per cent increase from last year. This makes up just a tenth of the overall Indian-linked funds. The bulk of the amount, CHF 3.02 billion, came through other banks and financial intermediaries.

The sharp rise is mainly attributed to a surge in funds parked through bank channels and corporate entities. Fiduciary and trust-based accounts accounted for CHF 41 million, while CHF 135 million was in other instruments such as bonds and securities. SNB clarified that these figures cannot be directly interpreted as black money or tax evasion.

Swiss officials have reiterated that funds held by Indian residents in Swiss banks are not automatically classified as illicit. “Assets held by Indian residents in Switzerland cannot be considered as 'black money',” authorities said. Switzerland has been cooperating with India on tax transparency and financial data sharing.

The operations between Switzerland and India been done under an Automatic Exchange of Information (AEOI) agreement, since 2018. Indian residents who have Swiss bank accounts, their financial details have been shared with Indian tax authorities annually, beginning with the first data transfer in 2019. Several hundred cases have been shared under this framework.

India has now climbed to the 48th position in terms of funds in Swiss banks. In 2023 the country was at the 67th position. However, the country still remains below its 2022 position of 46th. The UK leads the list with CHF 222 billion, followed by the US (CHF 89 billion) and West Indies (CHF 68 billion). Pakistan and Bangladesh held CHF 272 million and CHF 589 million, respectively.