A group of 70 investors has come together to complain of shortcomings in how HDFC Bank, India’s biggest private lender by assets, sold them a high-yielding financial product, marking the second such instance of customer complaints against the bank in West Asia.

According to the members of the group, who say they account for $12.5 million (nearly ₹120 crore) of an estimated $100 million that HDFC Bank raised from customers, the investment was pitched as a unique investment opportunity between 2017 and 2019, promising returns of 14-16%.

One of the investors, Umesh Kumar Chandanani, a retired banker in Australia, said he received a call from his HDFC Bank relationship manager sometime in 2019 pitching the said returns. The investment was in Luxembourg Life Fund run by Carlisle Asset Management, a life settlement fund registered in the eponymous tax haven. Chandanani said he invested $1.5 million in two tranches through HDFC Bank in the UAE.

Mint has not been able to independently verify the $100 million figure that HDFC Bank is said to have raised from its customers to invest in Carlisle.

A life settlement involves sale of a life insurance policy in the market at a discount to the original payout value. The third-party buyer keeps paying the premium until it gets death benefit. The difference between the upfront payment and the final payout, after accounting for premium payments, is the profit for the fund. Such settlements are available in the US, Canada, and Europe but not in India.

In October 2018, an executive from HDFC Bank had pitched the Carlisle fund as “very different from the normal traditional equity or bond fund”. “The fund has been averaging around 21% per annum since its inception… Last year, the fund returned 17.67% (2016) and for 2017, the fund is annualizing 18.89%,” the email said, a copy of which Mint has reviewed.

The mail also said that while most asset classes are typically affected by interest rate fluctuations, earning projections or credit rating shifts, life settlements are less sensitive to general drivers of global market turmoil and maintain an uncorrelated nature.

In a statement to Mint, HDFC Bank said it had facilitated the client investments, and the onus of fund performance and redemption lies with the fund house. The fund, it said, was registered in a recognized jurisdiction and at the time of investment, the fund had a track record demonstrating performance and honouring redemptions which may have led the customers to opt for it.

“The bank was not the sole distributor of the fund,” the spokesperson said. “Every investment involves inherent risks alongside the prospect of returns, and an unfavourable outcome cannot, on its own, be attributed to an intermediary whose role is purely facilitative. The bank has not found any incidence of mis-sell in this case.”

A year after investing, Chandanani says he was rudely shocked. The fund stopped redemptions in late 2020, leaving several investors in the lurch, many of them non-resident Indians.

Mint interviewed three more investors—the group comprises several retired individuals, distressed that they are yet to see the money they invested, let alone returns they were promised. They said they were presented the Carlisle investment would help them diversify beyond the traditional avenues. These investors said that the bank raised the funds through its presence in Dubai and Bahrain from 2017. All but Chandanani declined to be identified.

While Chandanani got partial redemption, not everyone was fortunate enough.

“I invested because the relationship manager told me this will diversify my investments beyond equity and debt,” said a second member of the group, a former banker who invested from Dubai. “Now, we have been going back and forth with the bank and nothing has happened even after six years, leaving us in the lurch.”

Another investor, also a retired banker, said he agreed to the investment despite being a savvy investor, but added that it was not possible for investors to have known all the risks and the background of the fund when a large lender like HDFC Bank was selling it to its customers.

Meanwhile, India’s largest private lender told investors earlier this month that it liaised repeatedly and extensively over the past years with Carlisle, external legal counsel, and the Luxembourg financial sector regulator.

In a letter to investors on 11 August, the Bahrain branch of HDFC Bank said that since November 2020, Carlisle has consistently failed to execute investor requests relating to redemption of their units. Mint has reviewed a copy of the letter.

HDFC Bank said in the letter that it is aware of and fully appreciates the “unsatisfactory nature of the outcome so far”. It added that its efforts should not be seen as admission of wrongdoing.

“Nothing in this communication, and no step taken by HDFC in this regard, should be construed as an admission of liability, fault, breach, wrongdoing or legal obligation on the part of HDFC,” it said. “HDFC’s actions are being undertaken without prejudice to its rights and positions, and as part of its ongoing efforts and goodwill towards its customers in the circumstances.”

Placing Carlisle products with customers is not the first time HDFC Bank has landed in a similar situation in West Asia.

In September 2025, HDFC Bank said that the Dubai Financial Services Authority, the regulator of financial services in the Dubai International Financial Centre (DIFC), barred the bank’s branch in the special economic zone from conducting any business with new clients. Six months later, the bank said its board committee on governance pronounced staff accountability actions against a few employees, including terminating employment of three of them.

Former HDFC Bank chairman Atanu Chakraborty hinted on CNBC-TV18 a few days after his abrupt resignation in March that “mis-selling” of Credit Suisse’s perpetual bonds was a bone of contention between him and the bank's management. Chakraborty had resigned citing certain practices that were “not in congruence” with his personal values and ethics.

A look at the background of the fund’s chief executive raises a host of red flags. These were identified in an investigation by Morpheus Research, founded in 2025 by former executives of Hindenburg Research, an American short-seller that shot into limelight in India in 2023 when it levelled multiple allegations at the Adani group. In January 2025, Hindenburg announced it was shutting shop.

In June 2025, Morpheus released a note on Florida-based Abacus Global Management, the firm that acquired Carlisle in December 2024. In a statement, Abacus refuted the report, calling it a “false and misleading short attack”. It also sued rival Coventry First LLC, parent company of life settlements provider Coventry Direct in June 2025.

Carlisle was led by CEO Jose Garcia since 2008. Morpheus found that Garcia was terminated from US-based life settlements broker Vespers in 2005 based on a slew of allegations, including the substance abuse while at work and mis-spending of at least $200,000 company funds, citing a counterclaim filed by Vespers against Garcia.

An Abacus spokesperson wrote to Mint that it has never had any control over or involvement with the fund more than five years prior to its acquisition.

A consultant who works with large banks said that while banks vet every product, at times, relationship managers go overboard selling it, without adequately explaining the risks involved. “Relationship managers have targets to meet and at times, these are prioritized over risk metrics,” said the consultant who did not wish to be named.

Other experts said that third-party distribution of financial products is a well-established and normal business function for banks, enabling banks to generate fee-based income without deploying their balance sheet.

“Where such distribution is undertaken through an overseas branch, a bank would ordinarily ensure compliance not only with the applicable regulatory guidelines governing the bank, but also with the relevant laws and regulations of the jurisdiction in which the branch operates,” said Prakash Agarwal, partner of advisory firm Gefion Capital.

Agarwal said that as a matter of standard governance and product oversight, financial products distributed by a bank would typically be subject to an internal product-approval process. “This would include an assessment of the product's suitability for the intended customer segment, the associated risks, applicable disclosure requirements, and any potential or perceived conflicts of interest.”