HDFC Bank faces new restrictions on its Dubai operations after a regulatory notice from the Dubai Financial Services Authority (DFSA). The bank’s DIFC branch can’t onboard new clients or promote financial services to them anymore.
The DFSA’s decision notice bans the branch from key activities with fresh customers, like giving financial advice, setting up investment deals, arranging credit, or handling custody services. Regulators raised red flags about how the branch handles services for customers who aren’t fully onboarded yet, plus problems in the overall onboarding process.
HDFC Bank quickly filed a statement with stock exchanges, saying it’s already taking steps to follow the rules. The bank promises to cooperate with the DFSA’s ongoing probe and fix these issues as fast as possible.
Good news for current clients: The restrictions won’t touch existing customers or anyone who got offers before but hasn’t signed on yet. The DFSA order stays in place until they change it in writing.
As of September 23, the DIFC branch has 1,489 onboarded customers, counting joint account holders.
This crackdown ties back to a two-year controversy over alleged mis-selling of high-risk Credit Suisse AT1 bonds. Angry investors blamed HDFC Bank’s UAE setup for pushing these bonds, which involved advice from DIFC staff, relationship handling in Dubai’s representative office, and account management through its Bahrain branch.
Probes focused on whether clients got proper onboarding under DIFC’s tough rules for “professional clients.” Many non-resident Indian investors took big hits, facing margin calls and losses when the AT1 bonds got wiped out in 2023 amid Credit Suisse’s downfall.
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