HDFC Bank on Saturday confirmed that its branch at the Dubai International Financial Centre (DIFC) has received a decision notice from the Dubai Financial Services Authority (DFSA).
The order restricts the branch from onboarding or soliciting new clients. This means the branch cannot provide financial services such as product advisory, investment deal arrangements, offering credit, or custody services to new customers.
The branch has also been stopped from issuing financial promotions to potential clients.
However, existing customers and those already offered services but not yet onboarded will remain unaffected. The restrictions will stay until DFSA decides to revoke or amend them in writing.
Compliance Concerns And Onboarding Issues
According to the DFSA, the concerns are linked to irregularities in the onboarding process and the way services were offered to customers who were not fully onboarded.
HDFC Bank clarified that the DIFC branch is a small part of its global operations and, as of September 23, served 1,489 clients, including joint account holders.
The bank said it has started corrective measures to resolve the regulator’s concerns and is cooperating with the ongoing probe.
In a statement, HDFC Bank said, “We are committed to working with DFSA and promptly addressing all issues raised.”
AT1 Bond Mis-Selling Controversy Resurfaces
This action is also connected to a two-year-old controversy regarding the alleged mis-selling of Credit Suisse additional tier-1 (AT1) bonds.
Many wealthy non-resident Indian (NRI) investors suffered heavy losses when these high-risk bonds were written down in 2023 during Credit Suisse’s collapse.
Investigations are looking into whether clients were correctly classified and onboarded under DIFC’s strict “professional client” rules.
Reports indicate that the bonds were promoted through HDFC’s UAE operations, involving advisory by DIFC staff and account bookings in Bahrain.
What Lies Ahead
While the restrictions do not have a major impact on HDFC Bank’s overall operations, the case highlights growing regulatory scrutiny in cross-border wealth management.
It also underlines rising compliance challenges for Indian banks expanding overseas, especially in regions with stricter financial standards.
