HDFC Bank on Saturday confirmed that its Dubai International Financial Centre (DIFC) branch has received a decision notice from the Dubai Financial Services Authority (DFSA) restricting it from onboarding or soliciting new clients. The order prevents the branch from providing financial services such as advising on products, arranging investment deals, offering credit, or providing custody services to any new customers.
The branch is also barred from issuing financial promotions to potential clients. However, existing customers and those previously offered services — but not yet onboarded — will remain unaffected. The restrictions will continue until the DFSA revokes or amends them in writing.
Compliance Concerns and Onboarding Issues
The DFSA highlighted irregularities in the branch’s onboarding process and concerns over how financial services were provided to customers who had not been fully onboarded. HDFC Bank stated that the DIFC unit represents a small portion of its global business and, as of September 23, served 1,489 clients, including joint account holders.
The bank said it has initiated remedial steps to address the regulator’s concerns and is cooperating with the ongoing investigation. “We are committed to working with DFSA and promptly addressing all issues raised,” the lender said in a statement.
AT1 Bond Mis-Selling Controversy Resurfaces
The latest regulatory action is closely linked to a two-year-old controversy over the alleged mis-selling of Credit Suisse additional tier-1 (AT1) bonds. Several wealthy non-resident Indian (NRI) investors suffered heavy losses after these high-risk bonds were written down in 2023 during Credit Suisse’s collapse.
Investigations are focused on whether clients were properly classified and onboarded under DIFC’s stricter “professional client” rules. Reports suggest the bonds were pushed through HDFC’s UAE operations, involving advisory from DIFC staff and account bookings in Bahrain.
What Lies Ahead
While the action does not materially impact HDFC Bank’s operations, it underscores the growing regulatory scrutiny on cross-border wealth management. The case also highlights rising compliance risks for Indian banks expanding overseas — particularly in jurisdictions with tighter financial standards.
