Janata Bank seeks urgent govt intervention to halt closure of UAE branches

Janata Bank’s board has sought high-level government intervention to halt the closure of its four branches in the United Arab Emirates (UAE) as the country’s central bank remains firm on its decision to wind down the bank’s operations.

In a letter sent on Monday, Janata Bank Chairman Md Fazlur Rahman asked Nazma Mobarek, secretary of the Financial Institutions Division under the Ministry of Finance, to convene an urgent meeting to determine the next steps.

The letter proposed bringing together representatives of the Financial Institutions Division, Finance Division, Bangladesh Bank, Foreign Ministry, Bangladesh Embassy in the UAE, and other relevant parties to find a way out of the crisis.

The Central Bank of the UAE (CBUAE) has appointed audit and consultancy firm Crowe UAE as administrator to oversee the winding-down process, effective from 8 October, according to the letter.

Capital shortfall triggers closure order

The crisis began after Janata Bank failed to meet the UAE’s minimum paid-up capital requirement. In 2021, the CBUAE raised the requirement for foreign banks from 40 million dirhams to 400 million dirhams.

Janata Bank’s UAE operations had paid-up capital of 100 million dirhams, while adding 83 million dirhams in retained earnings still left a shortfall.

On 8 July, the regulator restricted withdrawals and transfers from Janata Bank’s accounts held with it. On 15 July, it ordered the bank to gradually wind down its operations within a maximum of three years, while barring it from taking new customers or opening new accounts and requiring it to prepare to settle existing liabilities.

Although the Bangladesh government and Janata Bank subsequently tried to arrange additional capital, the UAE regulator did not accept the measures.

Janata Bank sent 300 million dirhams, equivalent to around $81.68 million, but the CBUAE did not recognise the funds as capital, citing non-compliance with regulatory requirements, and maintained its closure decision.

According to Janata Bank sources, at the UAE central bank’s direction, the money was transferred to the bank’s nostro account with Standard Chartered Bank in New York. The bank’s head office treasury division has been instructed not to use the funds for any other purpose until further notice.

On 18 August, Bangladesh’s ambassador to the UAE met the country’s central bank’s assistant governor to seek a resolution. Janata Bank also proposed a capital commitment of 2 billion dirhams to keep its operations running and to ensure the minimum capital requirement for each branch. These efforts failed to change the regulator’s decision.

Closure threatens services for expatriates

According to the chairman’s letter, Janata Bank serves around 70,000 depositors, 3,800 borrowers and nearly one million expatriate remittance senders through its four UAE branches and chief executive’s office.

The bank handles an estimated Tk800 crore to Tk1,000 crore in annual remittances from the UAE. Closing the branches could disrupt banking services for expatriates and affect the flow of remittances through formal channels to Bangladesh.

Janata Bank has operated in the UAE since 1974. Winding down its long-standing operations would also involve settling customers’ deposits and loans, managing employees, and bearing the costs of terminating related contracts.