In Swiss they trust, though the banks are not as cool as before

Mumbai: Why are so many Indians parking money in Swiss accounts despite the alpine banks losing their once-famed secrecy? Who are these people? Is it forbidden funds- as one would suspect- or kosher money? Questions are popping out from numbers released by the Swiss National Bank, claiming that Indian money with Swiss banks trebled in 2024. What has happened?

Some of the money flowing into the custody of these tight-lipped bankers may have a questionable colour. But, new rules in the UK and other countries, coupled with global uncertainties and choppy currency markets are driving many NRIs, wealthy families leaving India as well as rich residents to keep their money with Swiss banks, say financial advisors and lawyers familiar with such asset planning.

According to them, most of the recent deposits piling up in Swiss banks are not 'black money' but funds of overseas Indians moving from other jurisdictions to Switzerland-many choosing to hold family wealth in Swiss foundations and trusts which are governed by friendly regulations. Switzerland offers a framework to recognise trusts formed under foreign law.


"The recent overhaul of the UK's non-dom rules has prompted many NRIs to relocate to either the UAE or Europe. Understandably, they are moving their wealth accounts. Singapore and Switzerland are the natural choices for holding such accounts. This could be the reason for increased remittance to Switzerland. Singapore and Switzerland are increasingly attracting global investors as evolved financial jurisdictions," said Moin Ladha, partner at the law firm Khaitan & Co.

This year, the UK changed its 200-year old regime, causing many NRI families to look for second homes in other countries to escape high tax on overseas earnings and inheritance.

The Swiss central bank data show that Indian money held through asset managers, insurers, and other financial intermediaries surged three times to 3.5 billion Swiss franc (or ₹37,600 crore), after falling to a four-year low in 2023. Money in customer (or retail) accounts of Indian clients rose only 11% in 2024. "The numbers point at a broader global trend of capital reallocation driven by regulations and tax," said Ladha.

While there is no official statement from Swiss Banks about the reasons for the surge in Indian deposits, it reflects Switzerland's continued status as a trusted financial hub, said Isha Sekhri, who specialises in international and cross-border taxation. The strength and stability of the Swiss Franc amid geopolitical volatility, combined with its safe-haven reputation and agile regulations, make it an attractive destination for capital preservation, she said.

While the Swiss currency slipped last year, it has appreciated 9.5% against the US dollar since January, and has outperformed its peers to close 2023 as the best-performing G10 currency.

CONFIDENTIALITY LOST
However, with countries signing pacts to share information on owners of bank accounts and other financial assets, Swiss banks have probably lost some of their lure to those stashing illicit money. As the Swiss revealed data on active and many closed accounts, the Indian Income tax department and the Enforcement Directorate invoked harsh laws against black money and laundering to question residents and serve notices to several NRIs.

"Many of these accounts (linked to Indians) are held through investment vehicles or trusts where Indian individuals are 'ultimate beneficial owners' (UBOs), even if not named directly on the accounts. Enhanced global reporting standards could be contributing to greater visibility of such holdings," said Sekhri, partner at Isha Sekhri Advisory LLP.

"Originally, many large families preferred keeping the names of beneficiaries under wraps. Here, Swiss confidentiality came handy, paving the way for estate planning along with tax avoidance," said Mitil Chokshi, partner at the CA firm Chokshi & Chokshi.