HDFC Bank: HDFC Bank's troubles increase, ban on adding new customers in Dubai, know the reason..

HDFC Bank, the country's largest private bank, has suffered a major setback in the UAE. The bank stated that its Dubai International Financial Centre (DIFC) branch has received a notice from the Dubai Financial Services Authority (DFSA). Under this notice, the bank's DIFC branch is prohibited from receiving or contacting new customers. According to the notice, the DIFC branch is prohibited from providing financial services to new customers, including advising on financial products, arranging investments, arranging credit, and providing custody services. The branch is also prohibited from making financial promotions to new customers.

However, these restrictions will not apply to existing customers. These are customers who were previously offered financial services but were not yet fully engaged with the bank. This DFSA order will remain in effect until it is amended or revoked in writing. The DFSA has expressed concern about certain activities at the branch. These activities were related to providing financial services to customers who were not fully onboarded. Furthermore, questions have been raised about some issues with the customer onboarding process.

How many customers does the bank have?
HDFC Bank clarified that the operations of the DIFC branch are not material to its overall business and financial position. As of September 23, the branch had 1,489 customers, including joint account holders. In a statement, the bank said it has taken the necessary steps to comply with the instructions in the notice. The bank is committed to cooperating with the ongoing DFSA investigation and to addressing the DFSA's concerns as quickly as possible.

This action relates to a two-year-old dispute regarding the alleged mis-selling of risky Additional Tier-1 (AT1) bonds by Credit Suisse. Investors accused the bank of selling these products through its UAE operations, with the advice of DIFC officials. This included customer relationship management by the Dubai representative office staff. Account opening at the Bahrain branch was also part of this process.

What is the matter?
The regulator was investigating whether clients were properly onboarded in the DIFC. The DIFC is a region with different financial regulations. There is a strict framework for 'professional clients'. During the Credit Suisse collapse in 2023, AT1 bonds were liquidated. This resulted in significant losses for many wealthy non-resident Indian investors. They also faced margin calls on leveraged positions.

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