Highlights:
- Janata Bank’s paid-up capital in UAE stands at 100 million dirhams
- UAE requires Janata Bank to raise paid-up capital to 400m dirhams
- UAE central bank orders halt to new accounts and phased business wind-down
- Janata Bank seeks to raise UAE capital in phases over three years
- Bank seeks government support to meet UAE capital requirement
- UAE regulator also raises concerns over Janata Bank head office capital
Four branches of state-owned Janata Bank in the United Arab Emirates (UAE) face possible closure after the UAE central bank imposed restrictions on their operations over a capital shortfall and ordered preparations to wind down existing business unless the deficit is addressed.
Under CBUAE regulations, Janata Bank’s UAE operations are required to maintain paid-up capital of 400 million dirhams. The current paid-up capital is 100 million dirhams, leaving a shortfall of 300 million dirhams, or nearly Tk1,000 crore.
According to the Central Bank of the UAE (CBUAE), failure to meet the capital requirement increases risks to customer deposits and could lead to the closure of the bank’s operations.
The UAE central bank has restricted withdrawals from the Janata Bank branches’ accounts held with it, stopped them from opening new customer accounts and instructed them to prepare to gradually wind down existing operations.
According to Janata Bank officials, the measures were taken because the bank failed to maintain the minimum paid-up capital required under UAE banking regulations and due to concerns over the bank’s overall financial condition in Bangladesh.
On 8 July, CBUAE Assistant Governor Ahmed Saeed Al Qamzi wrote to Janata Bank’s UAE Chief Executive Officer Mohammad Kamruzzaman, directing him to inform the bank’s board of directors and quickly communicate its decision.
The UAE central bank also informed Janata Bank Managing Director Mazibur Rahman and Bangladesh Bank’s Off-site Supervision Department of its decision on 9 July.
The issue was discussed at the 884th meeting of Janata Bank’s board of directors on 14 July.
The board decided that an emergency meeting involving the Financial Institutions Division, Bangladesh Bank, the Ministry of Foreign Affairs and the bank’s chairman and managing director was needed to address the situation.
Accordingly, MD Mazibur wrote to the secretary of the Financial Institutions Division on the same day requesting such a meeting.
In its letter, the CBUAE said the regulatory measures had been taken because of concerns over Janata Bank’s capital position and its failure to comply with minimum capital requirements.
It said withdrawals from the bank’s accounts with the UAE central bank would be approved only in limited amounts to meet depositors’ claims. It also instructed the bank to stop accepting new customers and focus on settling existing liabilities and business.
In a separate letter sent to the bank’s head office on 9 July, UAE CEO Kamruzzaman sought guidance from the board on the next course of action.
Speaking to The Business Standard on 18 July, Janata Bank MD Mazibur said the bank had proposed increasing its paid-up capital to 400 million dirhams in phases over three years.
He said that if the UAE central bank did not accept the proposal, the paid-up capital would be increased with government assistance.
Responding to concerns raised by the UAE central bank over Janata Bank’s financial condition, Mazibur said the banking sector in Bangladesh faced broader challenges, with more than 20% of loans nationwide classified as defaulted.
He said around 70% of Janata Bank’s loans had become defaulted, but added that the bank continued to operate, maintaining its statutory liquidity ratio, disbursing agricultural and microloans, opening and settling government letters of credit, issuing new cards and paying around Tk125 crore in salaries each month without borrowing.
Mazibur said large-scale lending remained suspended and legal action had been taken to recover defaulted loans. He added that the bank was now focusing on smaller customers and expected its financial condition to improve.
According to Financial Institutions Division sources, the finance minister will be informed of the situation before further decisions are taken.
Additional capital needed
According to official documents, Janata Bank’s paid-up capital in the UAE currently stands at 100 million dirhams, while CBUAE regulations require foreign bank branches to maintain 400 million dirhams. This leaves the bank with a capital shortfall of 300 million dirhams, equivalent to nearly Tk1,000 crore.
In 2022, with Bangladesh Bank’s approval, Janata Bank increased the paid-up capital of its UAE branches from 75 million dirhams to 100 million dirhams. However, this still falls short of the current regulatory requirement.
MD Mazibur Rahman told The Business Standard that since 2016, all profits earned by the UAE branches have been retained there and added to paid-up capital.
In a separate letter dated 22 April, CBUAE Assistant Governor Ahmed Saeed Al Qamzi said the bank’s audited 2024 financial statements showed that the capital of Janata Bank’s head office had also fallen below the minimum equivalent of 2 billion dirhams required under UAE regulations.
The letter added that the bank’s actual capital position had further deteriorated because of inadequate provisioning.
In response, Janata Bank Chairman M Fazlur Rahman sent a commitment letter to the UAE central bank on 10 May, promising to increase capital in phases. However, the regulator was not satisfied and later imposed restrictions, including limits on withdrawals.
According to Bangladesh Bank data, Janata Bank’s capital deficit stood at Tk52,891 crore at the end of December 2024. At the end of March this year, its provision shortfall was Tk50,131 crore, while defaulted loans totalled Tk74,996 crore, representing 73.94% of its outstanding loans.
Future of UAE branches uncertain
Janata Bank began operations in the United Arab Emirates in October 1976 with an initial paid-up capital of 12.7 million dirhams. It now operates four branches in Abu Dhabi, Dubai, Sharjah and Al Ain.
The branches primarily facilitate remittance services for Bangladeshi expatriates and provide banking services to non-resident Bangladeshis. They also handle import and export letters of credit, trade finance, guarantees, deposits and commercial lending.
According to bank documents, the UAE operations earned a profit of 32 million dirhams up to 2020, of which 25 million dirhams was added to paid-up capital.
In 2017, Janata Bank also repatriated income equivalent to 8.36 million dirhams from its UAE operations.
Officials said the latest CBUAE directives, which bar the branches from taking on new customers and require them to prepare for a phased wind-down of existing business, have created uncertainty over their future.
Janata Bank’s 2025 audited financial statements also show mounting financial stress.
The bank posted a net loss of Tk3,931 crore during the year, nearly 28% higher than the previous year.
Net interest income stood at negative Tk5,903 crore, indicating that interest earned on loans was insufficient to cover interest paid on deposits.
The report also showed the bank’s net asset value per share had fallen to negative Tk108.51, meaning its liabilities exceeded its assets.
A senior Bangladesh Bank official, speaking on condition of anonymity, said Janata Bank was not in a position to meet the UAE branches’ capital requirement from its own resources.
“The financial condition of Janata Bank is weak. Since the government owns the bank’s domestic and overseas operations, it will have to decide how to proceed. Bangladesh Bank can provide guidance on banking regulations, but the decision on whether to continue operating the UAE branches rests with the government,” the official said.
The official added that if the government did not provide the required capital, any closure of the UAE branches would have to follow the UAE central bank’s regulations, taking into account the branches’ paid-up capital, deposits and other liabilities.
He said such a process would also involve significant costs for the bank.
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