Why has HDFC Bank's Dubai branch been barred from onboarding new clients?
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Synopsis
HDFC Bank's Dubai branch faces restrictions from the DFSA, halting new client onboarding amid concerns over financial practices. This decision comes after a controversy regarding the mis-selling of high-risk bonds. Explore the implications for the bank and its clientele as it navigates this regulatory challenge.
Key Takeaways
- HDFC Bank's DIFC branch is restricted from onboarding new clients.
- The DFSA raised concerns about the branch's onboarding practices.
- The restrictions do not affect existing clients.
- The bank is cooperating with the DFSA in its investigation.
- Over 1,400 clients are currently onboarded at the DIFC branch.
New Delhi, Sep 27 (NationPress) HDFC Bank has disclosed that its branch located in the Dubai International Financial Centre, referred to as the ‘DIFC branch’, has received a formal notice from the Dubai Financial Services Authority (DFSA), prohibiting it from onboarding or soliciting new clients.
Additionally, the DIFC branch is barred from soliciting, onboarding, or participating in any financial promotions with potential new clients, as stated in HDFC Bank's regulatory filing.
The notice indicates that the DIFC branch is restricted from providing financial services to new clients, which includes advising on financial products, arranging investment deals, credit facilitation, and offering custody services.
The regulator emphasized concerns regarding the branch's practices related to the delivery of financial services to clients who were not fully onboarded, as well as issues connected to the onboarding procedure.
"The Bank has already commenced essential actions to adhere to the directives outlined in the aforementioned notice and is dedicated to collaborating with the DFSA during its ongoing investigation, aiming to promptly rectify and address the DFSA concerns as swiftly as possible," the filing stated.
These restrictions, however, do not affect existing customers or clients who were previously provided financial services but had not yet completed the onboarding process. The DFSA order will remain in effect until it is amended or formally revoked.
As of September 23, 2025, the DIFC branch had onboarded 1,489 clients, including joint holders.
This regulatory measure follows a two-year-old controversy regarding allegations of the mis-selling of high-risk Credit Suisse additional tier-1 (AT1) bonds. Investors accused the bank of promoting these products through its operations in the UAE, involving advice from DIFC officials, management by staff at its Dubai representative office, and account management through its branch in Bahrain.
Investigations were conducted to ascertain whether clients were adequately onboarded in the DIFC, which operates under distinct financial regulations and a more stringent framework for "professional clients". Numerous non-resident Indian investors faced significant losses and margin calls on leveraged positions when the AT1 bonds were devalued in 2023 amid the collapse of Credit Suisse.
Point of View
Our perspective aligns with the nation’s interests. HDFC Bank's current situation underscores the importance of regulatory adherence in the financial sector. The DFSA's actions signal a commitment to protecting investors, ensuring that institutions maintain high standards of practice. As the investigation unfolds, it will be crucial to observe how the bank responds and what measures are taken to restore trust.
NationPress
27/09/2025
Frequently Asked Questions
What triggered the DFSA's restrictions on HDFC Bank?
The DFSA's restrictions were triggered by concerns regarding the branch's onboarding processes and its practices related to financial services provided to clients who were not fully onboarded.
Will existing clients be affected by this decision?
No, the restrictions imposed by the DFSA do not impact existing clients or those who were previously offered financial services but have not yet completed their onboarding.
What specific services is HDFC Bank's DIFC branch prohibited from offering?
The DIFC branch is prohibited from engaging in financial services for new clients, including advising on financial products, arranging investment deals, and offering custody services.
How many clients does the DIFC branch currently have?
As of September 23, 2025, the DIFC branch has onboarded a total of 1,489 clients, including joint holders.
What was the controversy surrounding HDFC Bank related to Credit Suisse?
The controversy involved allegations of mis-selling high-risk Credit Suisse AT1 bonds, with investors accusing the bank of promoting these products through its UAE operations.
