3 min readMar 21, 2026 08:17 AM IST
India’s largest private sector lender HDFC Bank has taken action against three executives, including senior branch banking head Sampath Kumar, over their alleged involvement in mis-selling of Credit Suisse AT-1 bonds to clients at its Dubai International Financial Centre (DIFC) branch in the UAE.
“The bank identified certain gaps in client‑onboarding requirements at its DIFC branch in the UAE and has completed a detailed and objective review of the matter,” the bank said in a statement to The Indian Express. “Appropriate remedial actions have been taken in line with internal policies. Personnel changes have been undertaken along with appropriate action as per the bank’s conduct regulation,” it said.
The bank said it has a well‑established governance framework and continues to remain committed to maintaining high standards of compliance and regulatory adherence.
Investors claimed that the lender mis-sold these bonds without providing a clear picture. HDFC Bank officials were accused of inflating NRI clients’ income to meet the eligibility criteria for AT-1 bond investments, with the promise of 12%-13% returns without a disclosure of the risks involved.
Additional Tier 1 (AT-1) bonds — a class of perpetual debt instruments issued by banks to bolster their capital base — are typically reserved for high-net-worth investors. While inherently risky, these bonds attract investors seeking strong returns as they offer higher interest rates compared to conventional bonds.
Last year, the Dubai Financial Services Authority (DFSA) had barred the bank’s DIFC branch from onboarding new clients, the lender informed the stock exchanges in September. The move was linked to the alleged mis-selling of financial products, including AT-1 bonds linked to erstwhile Swiss lender Credit Suisse, that left several Middle East investors with steep losses.
In its filing, the bank said the DFSA found violations at the DIFC branch, including offering financial services such as advisory and products or credit arrangement for customers who were not formally onboarded, along with lapses in onboarding procedures.
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AT-1 write-off & global lawsuits
Credit Suisse, which was acquired by its Swiss peer UBS in 2023, issued the AT-1 bonds. However, in March 2023, the Swiss Financial Market Supervisory Authority (FINMA) ordered a full write-off of nearly $17 billion of these instruments as part of UBS’s takeover of the troubled lender.
The move wiped out bondholders even as shareholders received UBS stock, sparking global outrage and lawsuits. Although AT-1 instruments are designed to absorb losses, Credit Suisse had claimed it met capital and liquidity standards, raising doubts about the necessity of the write-down.
Unlike regular bonds with fixed maturity, AT-1 bonds have no maturity date and can be written off or converted into equity if the bank comes under financial stress. Banks may also skip interest payments in such situations. Investors get regular coupon payouts as long as the bank is financially sound, but losses can be significant if its capital falls below regulatory thresholds.
The write-down has ushered in a wave of legal challenges from investors across Japan, the Middle East, and other regions, who argue that it breached treaty-based investment protections. In India, investors have filed complaints with the Economic Offences Wing in Nagpur, Chandigarh and Gurugram.
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