Dubai regulator bans HDFC Bank from adding clients

HDFC Bank, India’s largest private sector lender, has been barred from taking on new customers at its Dubai branch after regulators found lapses in how it onboarded clients.

In an exchange filing late Friday, the bank said it was penalized for offering financial services to local clients who were not onboarded through the Dubai International Financial Centre (DIFC).

The restrictions, effective from 26 September, limit its ability to grow in one of the world’s fastest-expanding financial hubs.

HDFC Bank emphasized that the Dubai business is not material to its overall financials and that remedial compliance steps are already underway.

The DIFC branch had 1,489 customers as of 23 September, according to the filing.

Shares of the lender rose 0.9% on Monday, bringing year-to-date gains to nearly 8%, broadly in line with the Nifty Bank index.

The bank has previously faced global scrutiny. In 2023, it was drawn into the fallout from Credit Suisse’s additional tier-1 bond wipeout, when some clients alleged misselling.

While HDFC Bank denied wrongdoing and insisted it complied with the law, the episode underscored the risks for Indian lenders operating across multiple regulatory jurisdictions.

In its home market, banks are prohibited from selling AT1 bonds to ordinary retail buyers, with sales limited to “professional investors” who hold more than $1 million in investable assets.