The $100-mn West Asia nightmare giving sleepless nights to HDFC Bank's NRI customers

Investor group escalates complaints against HDFC Bank over Carlisle fund

A group of investors who bought into Carlisle Asset Management's life settlement product through HDFC Bank's Dubai operations is set to write to the Prime Minister's Office this week, alleging mis-selling, substantial losses and years-long denial of redemption, as reported by The Economic Times.

The group, comprising more than 75 investors and accounting for more than $13.5 million in principal investment in Carlisle's Luxembourg Life Fund, is consolidating complaints and exploring legal action against HDFC Bank, according to investors who spoke to The Economic Times. They also plan to approach the Reserve Bank of India and the Central Bank of Bahrain, while some have already complained to the Dubai Financial Services Authority (DFSA).

"We are planning to write to the PMO this week, highlighting the serious client-suitability lapses at HDFC Bank in Dubai, concerns around leverage, disclosures, investor losses, and denial of liquidity," said Hitesh Bhatia, a Dubai-based former banker who invested in the fund in 2019. "We will request that the matter be referred to the appropriate regulatory and investigative authorities."

Separately, Livemint reported that a group of 70 investors, who say they account for $12.5 million of an estimated $100 million that HDFC Bank raised from customers, has complained about how the bank sold them a high-yielding financial product. The investment was pitched between 2017 and 2019, promising returns of 14-16%.

The product in question is the Luxembourg Life Fund run by Carlisle Asset Management, a life settlement fund registered in Luxembourg. A life settlement involves the sale of a life insurance policy at a discount to its payout value; the buyer pays premiums until the death benefit is received. Such settlements are available in the US, Canada and Europe, but not in India.

One investor, Umesh Kumar Chandanani, a retired banker in Australia, told Mint he invested $1.5 million via two tranches through HDFC Bank in the UAE after receiving a call from his relationship manager. Mint reported it could not independently verify the $100 million figure.

An October 2018 email from an HDFC Bank executive, reviewed by Mint, pitched the Carlisle fund as "very different from the normal traditional equity or bond fund", claiming it had averaged around 21% per annum since inception, with a 17.67% return in 2016 and an 18.89% annualized return in 2017.

The fund stopped processing redemptions in late 2020, according to Mint.

HDFC Bank's response and regulatory background

In a statement to Mint, HDFC Bank said it had facilitated the client investments, that the responsibility for fund performance and redemption rests with the fund house, that it was not the sole distributor, and that it had not found any incidence of mis-sell.

In a letter to investors on 11 August, HDFC Bank's Bahrain branch said that since November 2020, Carlisle had consistently failed to execute investor requests relating to redemption of their units. The bank's letter also stated that nothing in the communication should be read as an admission of liability, fault, breach, wrongdoing or legal obligation.

The investor group has given HDFC Bank until 31 August to respond before pursuing legal recourse, according to The Economic Times.

Investors allege that the product was marketed as a capital protection investment, with leverage offered along with the investment increasing their exposure and leading to significant losses during the Covid-19 market crash. One investor told The Economic Times that HDFC Bank offered leverage of three to five times the amount of deposits blocked with the bank for investment in the product. Another described the product as capital protection, insurance-linked, with past returns of 12-19% a year.

Background: Regulatory action and related episodes

The complaints come in the wake of DFSA action against HDFC Bank's DIFC branch in 2025. DFSA, the independent regulator for the Dubai International Financial Centre, restricted the branch from onboarding new clients and from conducting specified financial-services activities, in connection with alleged mis-selling of high-risk Credit Suisse AT1 bonds to retail customers, as reported by both The Economic Times and Livemint. In March, the regulator announced staff accountability actions, including terminating three employees, and in September, the ban on new clients was confirmed.

Former HDFC Bank chairman, Atanu Chakraborty, hinted on CNBC-TV18 that mis-selling of Credit Suisse perpetual bonds was a bone of contention between him and the bank's management, according to Mint.

Separately, Morpheus Research, founded by former Hindenburg executives, flagged that Carlisle's CEO, Jose Garcia, was terminated from US-based life settlements broker Vespers in 2005 over allegations of substance abuse at work and mis-spending of at least $200,000 of company funds, per Mint. Abacus Capital refuted the report as a 'false and misleading short attack', Mint reported.

Industry experts weigh in on distribution practices

The complaints raise questions about how financial products are vetted and sold by banks. A consultant who works with large banks told Mint that while banks vet every product, relationship managers sometimes "go overboard selling without fully explaining risks" because they have targets to meet.

Prakash Agarwal, partner of advisory firm Gefion Capital, said that as a matter of standard governance, financial products distributed by a bank would typically be subject to an internal product-approval process.

Investors also plan to approach the Reserve Bank of India and the Central Bank of Bahrain, the group said. Bhatia said the group is planning to hire a lawyer to take up the matter with DFSA. Rajeev officials of HDFC Bank and the DFSA could not be reached for further comment.

Perspectives

Investors: The investor group alleges mis-selling, non-disclosure of risks, excessive leverage, and long delays to redemptions, and is pursuing escalation to the PMO and regulatory bodies.

HDFC Bank: Maintains that it only facilitated the investments, that the fund house is responsible for performance and redemptions, that it was not the sole distributor, and that it found no evidence of mis-selling.

Carlisle Asset Management (via Abacus): Refutes negative claims, calling a critical report a "false and misleading short attack" — a position noted in the reporting.

Regulatory context: DFSA actions have already imposed restrictions on HDFC Bank's DIFC branch's operations, indicating a sanction related to separate alleged mis-selling, as reported.