HDFC Bank's Dubai unit faces DFSA curbs, barred from onboarding new clients

The bank's Dubai branch has been barred by Dubai authorities from taking on new clients or offering financial advice due to onboarding issues, though existing customers will not be affected

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HDFC Bank Limited, in an exchange filing on Friday, said that its Dubai International Financial Centre (DIFC) branch has received a Decision Notice from the Dubai Financial Services Authority (DFSA), placing restrictions on certain activities with new clients.

 

Effective September 26, the DFSA has prohibited the DIFC branch from soliciting or conducting any business with new clients who have not completed the branch’s onboarding process as of September 25, in activities including:

• Advising on financial products

• Arranging deals in investments

• Arranging credit

• Advising on credit and arranging custody

 

The branch has also been prohibited from soliciting, onboarding or engaging in any financial promotions with any new client under the same criteria. Existing clients, however, will continue to be served.

 

The restriction does not affect onboarding or servicing of clients who had been previously offered or provided financial services and who had not yet completed onboarding, so long as those dealings were already initiated before the issuance of the notice.

 

Reported non-compliance issues

 

The DFSA’s notice cites several concerns including handling of financial services with clients who had not completed onboarding, issues in onboarding processes, and other related compliance shortfalls.

 

As of September 23, 2025, HDFC’s DIFC branch had 1,489 customers, including joint account holders.

 

HDFC Bank said the restrictions are not material to its overall operations or financial position, adding that business from the DIFC branch makes up only a small portion of its operations.

 

"The bank has already initiated necessary steps to comply with the directives in the above-referred notice and is committed to work with the DFSA in its ongoing investigation and to promptly remediate and address the DFSA concerns at the earliest," HDFC said in an exchange filing.

 

Why has onboarding new clients been paused?

 

The latest regulatory move follows a controversy that has been ongoing for two years, centred on the alleged mis-selling of high-risk Credit Suisse additional tier-1 (AT1) bonds. Investors had accused the bank of promoting these instruments through its UAE network. The process reportedly involved advisory services from officials at the DIFC, relationship management by staff at its Dubai representative office, and booking of accounts through the Bahrain branch, according to a report by The Economic Times.

 

Authorities began looking into whether the DIFC unit had ensured proper client onboarding, given that the centre operates under its own financial regulations and applies a more stringent regime for 'professional clients'. The AT1 bonds were written down in 2023 as part of Credit Suisse’s collapse, leaving many wealthy non-resident Indian investors with steep losses and triggering margin calls on leveraged exposures.