HDFC Bank barred from onboarding new clients in Dubai
What's the story
The Dubai Financial Services Authority (DFSA) has barred HDFC Bank's Dubai International Financial Centre (DIFC) branch from onboarding new clients or providing financial services. The action comes over concerns related to the bank's onboarding practices. However, the lender has clarified that these operations are not material to its overall business and is taking steps to comply with the directives.
Regulatory action
What does the DFSA's directive entail?
The DFSA has prohibited HDFC Bank's DIFC branch from providing financial services to new clients, including advising on financial products, arranging investment deals, extending credit, and offering custody services. The branch is also barred from making financial promotions to new clients. However, these restrictions do not affect existing customers or those who were offered but not yet onboarded with financial services earlier.
Compliance efforts
Branch operations not material to overall business
HDFC Bank has said that the DIFC branch operations are not material to its overall business and financial position. As of September 23, the branch had a total of 1,489 customers (including joint account holders). The bank also said it has already initiated necessary steps to comply with the directives in the notice and is committed to working with DFSA in its ongoing investigation.
Investigation details
DFSA's concerns over onboarding practices
The DFSA has raised concerns over the DIFC branch's practices regarding financial services to customers who were not fully onboarded and issues related to its onboarding process. The regulator is investigating whether clients were properly onboarded in DIFC, a jurisdiction with separate financial rules and a stricter framework for "professional clients." This comes after a two-year-old controversy over the alleged mis-selling of high-risk Credit Suisse additional tier-1 (AT1) bonds.