HDFC Financial institution’s Dubai Worldwide Monetary Centre has been barred from onboarding new shoppers or providing monetary providers to them, following regulatory motion by Dubai’s monetary watchdog. The motion stems from issues over the financial institution’s onboarding practices and its function in previous mis-selling of complicated monetary devices. Whereas current shoppers stay unaffected, the choice provides to ongoing scrutiny the Indian financial institution faces within the UAE.
DFSA restriction on HDFC Financial institution’s DIFC department
The Dubai Monetary Providers Authority (DFSA) has imposed strict restrictions on the Dubai Worldwide Monetary Centre (DIFC) department of HDFC Financial institution Restricted, stopping it from onboarding new shoppers or selling any monetary providers till additional discover. As per the DFSA’s assertion issued on Thursday, September 25, the next actions at the moment are prohibited for shoppers who had not accomplished onboarding by that date:
- Advising on monetary merchandise
- Arranging offers in investments
- Arranging or advising on credit score
- Arranging custody providers
- Advertising or selling any monetary providers to potential shoppers
These restrictions took impact on Friday, September 26, and can keep in place except they’re amended or revoked in writing by the DFSA, in accordance with Article 75(1) of the Regulatory Regulation 2004.
HDFC Financial institution’s response and operational influence
In response, HDFC Financial institution, headquartered in Mumbai, issued a inventory change disclosure on September 26 confirming receipt of the DFSA’s determination. The financial institution acknowledged that compliance measures have already been initiated. The financial institution clarified that its DIFC department will proceed to serve its 1,489 current clients, together with joint account holders, as of Tuesday, September 23. It additionally assured stakeholders that the impacted enterprise isn’t vital within the context of the financial institution’s total operations.“The enterprise undertaken on the DIFC department isn’t materials to the Financial institution’s operations or monetary place, and no vital influence is predicted,” the disclosure signed by Firm Secretary Ajay Agarwal acknowledged. Moreover, the financial institution expressed its intent to totally cooperate with the DFSA:“The financial institution has already initiated vital steps to adjust to the directives within the above-referred discover and is dedicated to work with the DFSA in its ongoing investigation and to promptly remediate and handle the DFSA issues on the earliest,” stated the corporate in a press release.
Background, scrutiny tied to mis-selling of dangerous bonds
The present restrictions observe ongoing regulatory scrutiny over alleged lapses within the financial institution’s consumer onboarding course of. This scrutiny is carefully linked to a previous controversy involving the mis-selling of high-risk monetary devices, notably Credit score Suisse Further Tier-1 (AT1) bonds. These AT1 bonds had been worn out completely through the emergency merger between Credit score Suisse and UBS in March 2023, leading to vital losses for traders. Many of those traders had been rich non-resident Indians, a few of whom additionally confronted margin calls on account of leveraged positions primarily based on these bonds. The DFSA started analyzing whether or not HDFC Financial institution’s DIFC department had appropriately onboarded shoppers below the centre’s particular regulatory framework, which enforces stricter classifications for “skilled shoppers.” Investigations targeted on whether or not shoppers met the eligibility standards for being bought such high-risk devices. Earlier studies, together with one by Khaleej Instances in June, had detailed complaints that HDFC Financial institution was concerned in promoting these bonds by means of its UAE community. The gross sales course of reportedly included:
- Advisory providers from personnel within the DIFC department
- Relationship administration performed by workers at its Dubai consultant workplace
- Account execution and reserving by means of the financial institution’s Bahrain department
This multi-branch involvement raised regulatory issues about accountability and procedural lapses in consumer evaluation and threat disclosure.
What the restrictions imply and what’s subsequent
The DFSA’s present motion means HDFC Financial institution’s DIFC department can not have interaction in any monetary enterprise with new shoppers till the regulator is happy with remedial measures. Nevertheless, current shoppers should not affected by the choice and can proceed to obtain common providers. The financial institution has assured that it’s working carefully with the regulator to resolve the problems as rapidly as doable. No timeline has been shared publicly for when the restrictions is likely to be lifted. Whereas the enterprise influence seems minimal, given the small dimension of the DIFC department within the context of HDFC Financial institution’s world operations — the case provides to a rising listing of worldwide compliance challenges confronted by Indian banks as they develop into closely regulated jurisdictions just like the UAE.
