India’s largest private sector lender HDFC Bank has recently faced a significant regulatory challenge from the Dubai Financial Services Authority (DFSA). The DFSA has barred HDFC Bank from onboarding new clients or undertaking fresh business activities through its Dubai International Financial Centre (DIFC) branch. This development marks a critical moment for the bank’s operations within one of the world’s key financial hubs.
The DFSA’s action stems from HDFC Bank’s non-compliance with certain regulatory requirements. Specifically, the bank failed to adhere to rules concerning dealings with customers who were not onboarded directly by the DIFC branch. Additionally, there were notable lapses in the bank’s processes for advising and arranging credit for clients within the DIFC jurisdiction. These regulatory shortcomings prompted the DFSA to impose restrictions to safeguard client interests and maintain market integrity.
The issue first came to light in late May, when reports emerged about regulatory scrutiny sparked by complaints from bond investors. These investors raised concerns over the alleged mis-selling of high-risk Credit Suisse bonds, which added pressure on the DFSA to investigate HDFC Bank’s practices. This context helped frame the regulatory authority’s decision to act decisively against the bank’s DIFC branch operations.
In an official exchange filing, HDFC Bank clarified the nature of the prohibition. The bank stated that its DIFC branch is now prohibited from soliciting or conducting new business that involves carrying out financial services — including advising on financial products, arranging investments, extending credit, and similar activities. Moreover, the branch cannot solicit, onboard, or engage in any financial promotions with new clients. This comprehensive ban effectively freezes new client acquisition and certain business functions within the DIFC branch.
Despite the regulatory clampdown, HDFC Bank assured stakeholders that the operations conducted through the DIFC branch represent a relatively small part of its global business. With 1,489 customers onboarded as of late September 2025, the branch’s financial activities are not material to the bank’s overall financial position. The bank also emphasized that existing clients will continue to receive service without disruption. Furthermore, the ban does not affect clients who had previously been offered financial services but were not formally onboarded at the branch. The restriction remains in force until it is either amended or revoked by the DFSA in writing.
HDFC Bank is actively working to comply with the DFSA’s directives. The bank has initiated remediation steps and is committed to engaging constructively with the regulator to address the concerns raised. One key issue highlighted by the DFSA relates to the way the bank conducted business across different legal entities and jurisdictions. For instance, some clients were managed by relationship managers in HDFC’s UAE office, while investment advice came from the DIFC branch. Meanwhile, the accounts themselves were booked with HDFC’s Bahrain branch, from where clients would open and fund their accounts to purchase bonds.
This cross-border banking practice, where client interactions and account management span multiple jurisdictions, is not unusual in the global banking landscape. However, it complicated the regulatory compliance picture for HDFC Bank within the DIFC framework. DIFC operates as a financial free zone with its own independent legal system, separate from the broader UAE laws. This special status means that financial institutions operating in the DIFC must strictly meet the local regulatory requirements.
As HDFC Bank navigates this regulatory challenge, the focus remains on ensuring full compliance and rebuilding confidence among investors and regulators alike. The bank’s experience underscores the complexities faced by global financial institutions operating in multiple jurisdictions with differing regulatory environments. It also highlights the importance of transparent, well-coordinated operations to meet stringent regulatory standards across borders.
