However, the customer deposits have actually fallen from the end of 2019. The funds held through fiduciaries have also more than halved from the end of 2019. The biggest increase is in “Other amounts due from customers”. These are in form of bonds, securities and various other financial instruments.
It is pertinent to point out that India and Switzerland are signatories to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC) and both countries have also signed the Multilateral Competent Authority Agreement (MCAA) pursuant to which, the Automatic Exchange of Information (AEOI) is activated between the two countries for sharing of financial account information annually for the calendar year 2018 onwards.
Exchanges of Financial Account information in respect of residents of each country have taken place between both countries in 2019 as well as 2020. In view of the existing legal arrangement for the exchange of information of financial accounts (which has a significant deterrent effect on tax evasion through undisclosed assets abroad), there does 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.
Further, the following factors could potentially explain the increase in deposits:
- Increase in the deposits held by Indian companies in Switzerland owing to increased business transactions
- Increase in deposits owing to the business of Swiss Bank branches located in India
- Increase in Interbank transactions between Swiss and Indian Banks
- A capital increase for a subsidiary of a Swiss Company in India and
- Increase in the liabilities connected with the outstanding derivative financial instruments
The Swiss Authorities have been requested to provide the relevant facts along with their view on possible reasons for the increase/decrease in the light of the media reports highlighted above.