Is South Korea the new safe haven for Indian Swiss bank account holders?

The South Korean cryptocurrency craze might have induced Indians to shift money from traditional havens.

With Switzerland gearing up to share with India the information of Indian bank account holders, there seems to have been a massive exodus of Indian money to South Korea in the past year. Bank of International Standards (BIS) data show a 900 per cent spike in non-bank deposits in South Korean banks during 2018.

Non-bank deposits include corporate and individual deposits and exclude inter-bank transactions. These were the same deposits that were quoted by former finance minister Piyush Goyal in 2018 to defend the Narendra Modi government over Indians’ rising deposits in Swiss banks.

BIS data show that non-bank loans and deposits of Indian residents in South Korea stood at $904 million at the end of 2018. The previous year, Indians had held just $1 million in South Korean banks. Since the Modi government came to power for the first term in 2014, Indians barely held about $4 million in that country. By comparison, such deposits by Indians across the world was $9.5 billion in 2018 — $1 billion more than a year before.

This astronomical rise seems to coincide with a surge in non-bank deposits in South Korea from across the world. Such deposits in South Korea from individuals across the world almost doubled in 2018 — from $19 billion a year before to $37 billion.

Even as South Korea has seen a stupendous surge in money held by Indians as non-bank deposits, there has been a gradual outflow of money from Swiss bank accounts and certain other tax havens traditionally used for stashing wealth to evade taxation. According to BIS, Indians held just about $85 million in non-bank deposits in Swiss banks in 2018, compared with $347 million in 2014. Swiss bank deposits fell every year during the tenure of the first Modi government.

The initial trend of an exodus from Switzerland and an influx into Hong Kong’s banks also seems to be cooling off. Indians’ deposits in Hong Kong touched a five-year high of $1.4 billion in 2015 but fell to almost $600 million in 2018.

There was also a significant fall in such deposits by Indians in other tax havens like Isle of Man and Jersey. The trend of post-recession increase in non-bank deposits by Indians in the United Kingdom (UK), meanwhile, continues to show an upward trend. In 2018, it touched a five-year high of $2.7 billion, the highest among all nations.

Business Standard