More than 75 investors who put money into Carlisle’s Luxembourg Life Fund through HDFC Bank’s Dubai operations are preparing to take their grievances to the Prime Minister’s Office (PMO), escalating a dispute over alleged mis-selling, investment losses and difficulties in getting their money back.
The investors, whose combined principal investment is reported to be more than $13.5 million, are also looking at approaching the Reserve Bank of India (RBI) and the Central Bank of Bahrain. Some investors have already filed complaints independently with the Dubai Financial Services Authority (DFSA), according to reports.
The controversy centres on a Carlisle-linked life settlement product that investors say was sold to them as an insurance-linked investment with capital-protection features and a history of annual returns in the range of 12% to 19%. They allege that the risks involved, particularly those arising from leverage and liquidity restrictions, were not adequately explained when they invested.
For the investors, the biggest concern now is not just the losses but the length of time they have been unable to access their money. They allege that redemption requests have remained unresolved for years, turning the dispute into a prolonged battle for liquidity.
The group is reportedly consolidating its complaints before approaching government and financial regulators. Investors are also exploring possible legal action against HDFC Bank over what they describe as lapses in client suitability, risk disclosure and the way the product was marketed.
One investor, Dubai-based former banker Hitesh Bhatia, invested in the fund in 2019 and has raised concerns over the way the product was presented to customers. The investors’ complaints include questions around leverage, disclosures, losses and the alleged denial of liquidity.
A key issue is the structure of the investment itself. Life settlement funds generally invest in life insurance policies purchased from policyholders who no longer want or need them. The fund continues paying premiums and eventually receives the policy proceeds when the insured person dies. Such products can offer returns that are not directly linked to conventional stock or bond markets, but they also carry risks related to liquidity, policy valuations, mortality assumptions and financing arrangements.
Investors allege that leverage associated with their investments magnified their exposure when markets came under pressure during the Covid-19 period. They say this aspect of the product was not sufficiently understood when the investments were made.
The allegations have put another overseas banking operation of HDFC Bank under scrutiny. The lender has already faced regulatory action in the Dubai International Financial Centre over a separate dispute involving the alleged mis-selling of Credit Suisse Additional Tier-1 (AT1) bonds to retail customers.
That earlier controversy involved high-risk securities that were wiped out during Credit Suisse’s emergency takeover by UBS in 2023. The DFSA subsequently took action against HDFC Bank’s DIFC branch over its conduct in relation to the sale of those instruments.
HDFC Bank has previously disputed allegations surrounding its role in investment products, maintaining in earlier reports that it acted as a facilitator and was not responsible for the performance of the underlying investments. The bank has also pointed to the regulatory status of the investment products involved.
The latest Carlisle dispute comes at a challenging time for HDFC Bank. Its shares fell to a fresh 52-week low of around ₹710 on Thursday, extending a broader decline that has seen the stock lose roughly 28% so far this year. The pressure on the stock has been linked to a combination of regulatory concerns, leadership uncertainty and legal issues.
The Carlisle allegations are not the only issue weighing on investor sentiment. HDFC Bank is also facing a separate US lawsuit involving allegations that the lender and senior executives were connected to improper payments. The bank has rejected those allegations and said it intends to defend itself.
For the Carlisle investors, however, the immediate objective is clearer: they want regulators and government authorities to examine how the product was sold and why investors have faced prolonged difficulties in accessing their funds.
The proposed PMO complaint could bring a fresh level of scrutiny to the dispute. Investors are seeking intervention from multiple authorities, hoping that regulatory attention will help establish accountability and provide a route towards resolving their claims.
The case also raises broader questions about the sale of complex financial products to wealthy and overseas clients. Products offering attractive returns can carry significant risks when leverage, liquidity restrictions and underlying investment structures are involved. Clear risk disclosures and proper assessment of a customer’s suitability therefore become particularly important.
With the investors preparing to approach the PMO, RBI and other regulators, the long-running Carlisle-HDFC Bank dispute is now entering a potentially more consequential phase.
The allegations remain mere claims by the investors and have not been conclusively established against HDFC Bank. Any regulatory or legal proceedings that follow will determine whether there were violations in the way the Carlisle product was marketed and sold.