Page 390 - Contributed Paper Session (CPS) - Volume 4

CPS2444 Avijit Joarder et al.
the share of outflow from banks was never below 34% and reached at 78% of
the total by end-2017.
Liabilities of Indian residents to foreign banks increased from 13 billion
USD in end-March 1990 to nearly 200 billion USD in end-2017. It means that
lending banks in other countries are gradually getting more confident to put
their money in India. In terms of sector breakdown, the share of inflow to non-
banks has always been less than share of inflow to bank sector. Unlike bumpy
outflow of funds, inflows to India from banks in foreign countries increased
steadily over time, except for a brief period during end-2008 to end-2009.
Nearly 40% of total inflow is routed through banks in offshore centres. It
clearly stands out that non-bank sector attracted the largest share until end-
2002 and thereafter inflow to banks steadily increased to current share at 53%
of total inflow to India. The steady decline in inflow to non-banks from banks
abroad is mainly attributed to alternative low cost sources of funds (e.g.
issuance of euro-bonds).
Inflow of money from foreign banks is nearly 3 times more than money
outflow. International banks in different countries play important role for
capital inflow and outflow. As of end 2017, nearly 40% of total inflow (liabilities
for resident Indians) are from international banks located in offshore centres,
and another 40% from banks in US, UK, Switzerland, Japan and Australia. On
the contrary, about one-third of assets (outflow from India) are placed with
banks in offshore centres and about 40% with banks only in US and UK.
In terms of currency breakdown, USD denominated assets and liabilities
remained the major currency of transactions with banks in foreign countries.
Majority of these are accounted by deposits and loans. In case of outflow from
India, Euro and British pound are other two preferred currencies for deposits
abroad. In the case of inflow to India, Japanese yen and Euro are the other two
preferred currencies for loans from banks in foreign countries.

3.4 Cross-border capital outflow from India non-bank sector to banks in
foreign countries
There have been popular perceptions that Indians keep money with banks
in Switzerland, but the BIS statistics reveal that money placed by non-bank
sector of India with banks in Switzerland have reduced over time to negligible
in terms of both size and share in such deposits. We conclude in the following
analysis that the term “money in Swiss banks” from Indian non-bank sector is
probably a generic term to mean foreign destinations. As we do not have any
information on sources (of income) deposits, we only look at the destinations
of total outflow from Indian non-bank sector to banks in foreign countries.
The coverage of BIS locational banking statistics increased over time from 51%

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