New Delhi | One of India’s largest private lenders, HDFC Bank, is facing a serious internal controversy after taking strict action against three senior officials over alleged mis-selling of complex financial products. The bank has reportedly terminated the services of these executives, marking a significant step toward fixing accountability within its ranks.
According to sources familiar with the matter, those dismissed include Sampath Kumar, Group Head of Branch Banking, along with Harsh Gupta, Executive Vice President, and Payal Mandhyan, Senior Vice President. The trio is accused of misleading non-resident Indian (NRI) clients into investing in high-risk instruments through overseas banking channels.
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The controversy centres around Additional Tier-1 (AT-1) bonds issued by Credit Suisse. These instruments were allegedly pitched to clients as “fixed-maturity” and “assured return” investments. In reality, AT-1 bonds are perpetual in nature, carry higher risk, and do not have a fixed maturity period—making them unsuitable for conservative investors unless properly explained.
Sources indicate that much of the alleged mis-selling activity was routed through the bank’s Dubai and Bahrain branches. Several NRI clients have claimed they were persuaded—through misleading communication—to transfer their FCNR (Foreign Currency Non-Resident) deposits from India to Bahrain-based accounts. One investor alleged that signatures were obtained on blank documents, with the terms of investment later altered.
The issue escalated further when AT-1 bonds worth nearly $20 billion issued by Credit Suisse were written off during a global financial crisis. Although a Swiss court later termed the write-off “unlawful,” the development intensified concerns among investors who had been sold these instruments as safe products.
Investigations have also revealed potential lapses in internal oversight. A senior executive, speaking on condition of anonymity, said that even if all individuals were not directly involved in the mis-selling, the transactions occurred under high-level supervision, raising serious questions about internal controls and governance standards.
Following these developments, international regulators have also taken note. The Dubai Financial Services Authority had earlier imposed restrictions on the bank’s Dubai branch, barring it from onboarding new clients. This move is expected to impact the bank’s overseas operations and client acquisition strategy.
While HDFC Bank has not issued an official statement on the matter, the internal disciplinary action suggests that the institution is treating the issue with urgency. Banking experts believe the case highlights broader concerns around transparency in the sale of complex financial instruments.
Market observers point out that AT-1 bonds are not typically suitable for retail investors, especially NRIs, unless the risks are clearly communicated. Mis-selling of such products not only results in financial losses for clients but also erodes trust in the banking system.
The investigation is currently ongoing, and further action cannot be ruled out. The episode has once again raised critical questions about whether existing safeguards are sufficient to protect investors, or if stricter regulatory oversight is required to prevent such incidents in the future.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
