Dubai regulator flags integrity lapses at HDFC’s DIFC branch, says issues went unreported for five years

India’s largest private lender HDFC Bank has come under regulatory scrutiny after the Dubai Financial Services Authority found serious compliance lapses at its branch in the Dubai International Financial Centre (DIFC). According to regulatory findings, the branch failed to report significant issues for more than five years and did not meet required standards of integrity and fair dealing.

The investigation was triggered after customers alleged they were mis-sold risky Additional Tier-1 bonds issued by Credit Suisse through the bank’s operations in Dubai and Bahrain. Regulators observed that internal compliance and audit teams were aware of irregularities but did not escalate the matter to authorities for several years, raising concerns about oversight and governance at the branch.

In its order, the regulator said the failure to report the issues showed that the branch had not been “open and cooperative” with supervisory authorities and had not maintained high integrity standards. The DFSA concluded that the senior management and control functions were unable to effectively identify and resolve the problems.

The controversy has also drawn attention because of broader governance concerns within the bank. Following the revelations, internal disciplinary actions were taken against several executives and the regulator had earlier restricted the Dubai branch from onboarding new clients or offering certain services. The developments have intensified scrutiny over governance and compliance practices in the bank’s overseas operations.