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

Check on black money in polls futile if identity of donors is not known: SC

When the bank issues the electoral bond, does it have details on which bond was issued to 'X' and which bond was issued to 'Y'?, asks Supreme Court Bench.

Business Standard : If the identity of the purchasers of electoral bonds meant for transparent political funding is not known, then the efforts of the government to curtail black money in elections would be ‘futile’, the Supreme Court said Thursday.

The Supreme Court made the remark as Attorney General (AG) K K Venugopal, appearing for the central government argued before it that the voters do not need to know the source of funding as political parties also have a right to privacy. The source of the funding should not be in question as long as it was legitimate, Venugopal said.

The apex court was hearing a petition moved by non-government organisation Association for Democratic Reforms (ADR) challenging the validity of electoral bonds and its usage for political funding in the ongoing general election. The Bench, comprising Chief Justice Ranjan Gogoi and Justices Deepak Gupta and Sanjiv Khanna, reserved its verdict on the plea for Friday.

Defending electoral bonds, Venugopal told the Bench that the launch of the instrument was a policy decision for which no government could be faulted.

The Bench asked Venugopal as to whether banks know the identity of purchasers at the time of issuing electoral bonds. He answered in affirmative and then said banks issue bonds after ascertaining KYC which is applicable for opening the bank accounts.

“When the bank issues the electoral bond, does the bank have details on which bond was issued to ‘X’ and which bond was issued to ‘Y’?” the Bench said.

On getting the response in negative, the Bench said, "If the identity of purchasers of bonds is not known then there will be greater ramification on the Income Tax law and all your (government's) efforts to curtail black money will be futile".

During the hearing on Wednesday, the central government and the Election Commission of India (EC) had taken opposing stands. The government had defended the scheme and said that electoral bonds could be used to curb black money. The EC had said that while it was not opposed to the use of the bonds as an instrument, it did not want the donations via them to remain anonymous.

Appearing for ADR, senior advocate Prashant Bhushan had on Wednesday told the court that it should either stay the use of the bonds or ensure that there is transparency by asking either the bank issuing them or the political party receiving the donations.