HDFC Bank’s DIFC branch (located in the Dubai International Financial Centre) has been restricted by the Dubai Financial Services Authority (DFSA). DFSA took this action due to concerns about HDFC Bank’s client onboarding practices at the DIFC branch. The regulator found problems with how the branch provided financial services to clients who weren’t fully onboarded (i.e., their accounts weren’t fully set up properly) and also found issues in how new clients were being onboarded (possibly skipping rules or checks).
These rectistions are only for new clients, existing clients are not affected by this order
What are the restrictions imposed by DFSA?
After the restriction the branch cannot:
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Sign up new clients
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Give financial advice to new clients
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Help arrange investments or loans for new clients
- Provide custody (safekeeping of assets) services to new clients
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Do marketing or promotional activities to attract new clients
What does this restriction mean?
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The restrictions are limited to one overseas branch in Dubai.
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Existing clients at the DIFC branch are likely unaffected — the restrictions apply to new clients only.
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This situation does not have a major impact on HDFC Bank’s overall business or financial stability.
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However, it highlights regulatory scrutiny over international compliance and onboarding standards.
Background of the case:
This action comes after a two-year-old controversy involving: High-risk Credit Suisse AT1 bonds (a type of complex investment product) These bonds became worthless in 2023 when Credit Suisse collapsed. Many wealthy Indian investors in the UAE lost money, some took loans to buy these bonds and now face big losses and margin calls.
It’s a big deal because some investors had even borrowed money (took loans) to buy these bonds, increasing their risk. When the bonds became worthless, they not only lost their investments but were also hit with margin calls (demands to repay loans or add more collateral).
What Did HDFC Bank Say?
HDFC Bank responded by saying:
- The DIFC branch operations are not material to its overall business The branch had total of 1,489 customers as of September 23, so this branch contributes very little to the bank’s global revenues or operations and it won’t have a major financial impact.
- The bank is taking corrective actions to comply with the DFSA’s directives and address the concerns.
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The bank is cooperating with the regulator and working to fix the issues.
Currently the ban will stay in place until the DFSA changes or removes it. HDFC Bank is trying to resolve the issues as soon as possible.