Page 391 - Contributed Paper Session (CPS) - Volume 4

CPS2444 Avijit Joarder et al.
5
in 1977 to 93% in 2016 . We thus assume that overage of total outflow (assets
abroad) is at least above 90%.
At an aggregate level, nearly 100% of outflow from bank and non-bank
sectors to banks in foreign countries was in deposits. The share of deposits
with banks, however, sharply fell to about 78% during 2008-2009 before
raising again to above 90% in subsequent years. As a result, we assume total
outflow was in the form of deposits and those in debt securities and others
are negligible. Another reason for such an assumption is that bilateral data on
deposits with banks abroad in different reporting jurisdictions are not freely
available on the BIS website. Further, in order to ensure data confidentiality,
we used 4 quarters average in respective years for amount outstanding as well
as for share of deposits. We noticed that traditionally non-bank sector of India
has been placing their deposits with banks in UK, US and offshore centres
rather than in Switzerland. The UK has been the favourite destination having
the share above 20% in the past. After GFC, the banks in the US increased their
share from 9% in 2008 to 15% in 2017. On the contrary, money with Swiss
banks have started to fall continuously from its peak share of 35.3% in 1990
to 1.7% in 2017, and in fact started to fall almost in the same year of 2008 with
increase with banks in the US. In terms of amount outstanding, such deposits
was at 3,824 million USD in end March 2007 and reduced merely to 285 million
USD in end 2017. The banks in offshore centres (Hong Kong, Singapore and
10 other centres) and those in developing countries (China, Russia, Malaysia,
Chinese Taipei and 9 other countries) gradually picking up their share of
deposits from non-bank sector in India. While the total outflow from non-bank
sector significantly reduced since 2012, Switzerland is not among the top
favourite destinations.

3.5: Comparison of longer-term behaviour - India versus selected five
Asian countries
In 1997, India had several capital account restrictions that prevented inflow
of short-term portfolio investments (often called "hot money") flowing into
the country. Active capital inflows are a dual-edged sword for the recipient
countries. On the positive side, capital flows support economic growth and
provide welfare gains by financing productive investment opportunities and
consumption smoothing. On the negative side, capital surges tend to bring
inflationary pressures making the economy more vulnerable to external
shocks. Prior to the GFC (2008), emerging markets in general appeared
insulated from developments in the US and at the advent of GFC, emerging
markets responded very strongly with policy measures to further insulate

5 Global coverage estimated is published at
https://www.bis.org/statistics/lbs_globalcoverage.pdf
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