Dubai’s financial watchdog, the Dubai Financial Services Authority (DFSA), has directed HDFC Bank’s Dubai International Financial Centre (DIFC) branch to stop onboarding new customers, citing regulatory compliance concerns.

The decision, communicated through a notice dated September 25, 2025, also imposes restrictions on the bank’s ability to offer a wide range of financial services in the emirate.

According to reports, the directive prevents the branch from conducting business with customers who had not completed their onboarding process by the date of the order. In addition, the DFSA has prohibited the DIFC branch from engaging in activities such as providing financial product advice, offering custody-related services, arranging or advising on credit, and facilitating investment deals.

The bank has also been instructed not to engage in financial promotions within the jurisdiction.

Despite the restrictions, existing customers of the branch will not be affected. Those already availing services before the directive, even if not formally onboarded, will continue to have access to the bank’s offerings.

The move comes amid heightened regulatory scrutiny following complaints about the mis-selling of high-risk Credit Suisse additional tier-1 (AT1) bonds through HDFC Bank’s UAE operations. The controversy has been under investigation for nearly two years.

In an official statement, HDFC Bank acknowledged the DFSA’s directive and confirmed that necessary steps have already been taken to ensure compliance. The bank emphasized that the business undertaken by the DIFC branch represents only a small portion of its global operations.

“The bank has already initiated necessary steps to comply with the directives in the above-referred notice and is committed to work with the DFSA in its ongoing investigation and to promptly remediate and address the DFSA concerns at the earliest,” the statement said.

The bank further clarified that the development will not significantly impact its financial position. “The business undertaken at the DIFC Branch is not material to the Bank’s operations or its financial position and accordingly no material impact/implications are expected with respect to the overall operations or financial position of the Bank,” it added.

As of September 23, 2025, the DIFC branch served 1,489 customers, including joint account holders, according to The Economic Times. While the customer base is relatively modest, the restrictions underscore the regulator’s growing concerns about compliance standards and transparency in the UAE’s financial sector.

The DFSA’s decision is being seen as part of a broader tightening of regulatory oversight in Dubai’s financial hub, which has become a key destination for global banks and investors. Experts suggest that while the move may not materially affect HDFC Bank’s global presence, it highlights the increasing importance of compliance and due diligence in cross-border financial operations.

For now, HDFC Bank’s focus will remain on cooperating with the regulator and addressing concerns in order to resume normal operations at its DIFC branch.