Janata Bank asked to appoint administrator by 15 Aug as UAE moves to wind up branches

The Central Bank of the United Arab Emirates (UAE) has instructed Bangladesh's state-owned Janata Bank PLC to appoint an administrator by 15 August to oversee the winding-up of its operations in the Gulf country after the bank failed to meet the required paid-up capital threshold.

The directive was issued in a letter dated 15 July from the UAE central bank to Mohammad Kamruzzaman, Chief Executive Officer of Janata Bank's UAE operations.

Kamruzzaman subsequently forwarded the letter to Janata Bank Managing Director Md Majibur Rahman, seeking guidance on the next course of action.

Under the UAE central bank's directive, Janata Bank must appoint a qualified administrator within 30 days of the letter's issuance, or by 15 August. However, the appointment will require prior approval from the UAE regulator.

Janata Bank has been operating in the UAE since 1976 and currently runs four branches in Abu Dhabi, Dubai, Sharjah and Al Ain.

The branches primarily provide remittance services to Bangladeshi expatriates, while also offering deposit-taking, trade finance and other banking services.

Under UAE banking regulations, Janata Bank's UAE operations are required to maintain paid-up capital of 400 million UAE dirhams. However, the bank currently has only 100 million dirhams, leaving a shortfall of 300 million dirhams (around Tk10 billion).

The UAE central bank had previously warned that failure to bridge the capital gap could lead to the closure of the bank's operations, citing increased risks to depositors arising from inadequate capital.

According to the latest letter, the regulator had already expressed serious concerns in a communication dated 8 July over Janata Bank Group's financial condition and its failure to comply with minimum capital requirements. The two sides had also exchanged correspondence on the issue in April and May.

Janata Bank Managing Director Md Majibur Rahman said the bank's UAE branches initially operated with paid-up capital of 40 million dirhams, which was raised to 400 million dirhams in 2021.

"All four branches are profitable, and we have been gradually addressing the capital shortfall using retained earnings. This arrangement had continued until now," he said.

Majibur Rahman said the UAE authorities were now insisting that the entire paid-up capital be deposited at once, adding that "there may also be some geopolitical considerations behind the decision."

He said, “The matter has been brought to the attention of the secretary of the Financial Institutions Division and the governor of Bangladesh Bank (BB). The BB governor has already written to his UAE counterpart requesting further consideration.”

"We hope they will grant us more time. If the government supports us in meeting the remaining paid-up capital requirement, we believe a solution can be reached. The government is also aware of the issue," he added.