Dhaka: Bangladesh's state-owned commercial banks have the capacity to expand lending but continue to lag in timely loan recovery, said central bank Governor Ahsan H Mansur on Monday, underscoring a key structural weakness in the country's banking system. Speaking at Sonali Bank's Annual Conference 2026, Dr Mansur highlighted the challenges posed by weak borrower selection, which contributes to rising defaults, and emphasized the need for improved credit appraisal to prevent loans from becoming non-performing.
According to United News of Bangladesh, years of tight regulatory controls have rendered state banks overly cautious, constraining credit growth and limiting their impact on the broader economy. While such caution was once necessary, the Governor noted that an excessively restrictive lending model, akin to practices before 2000, is now misaligned with the demands of a modern economy. Dr Mansur urged Sonali Bank to adopt a more assertive approach to lending, moving away from its conservative stance to better contribute to the macroeconomy.
Dr Mansur pointed out a significant disparity between Bangladesh's banking sector and global peers, especially in consumer and housing finance, where state-owned banks have played a minimal role despite strong market potential. He encouraged Sonali Bank to transform into a 'full-fledged commercial bank' operating on commercial principles to ensure long-term profitability.
The Governor also highlighted positive developments in Sonali Bank's financial position. Profits from the previous year will address capital and provisioning shortfalls, fostering confidence that the bank could resume dividend payments. The bank's non-performing loan ratio has decreased to below 18%, with potential for further decline through increased high-quality lending.
Additionally, Dr Mansur mentioned the government's plans to grant Sonali Bank greater operational autonomy, allowing it to function based on commercial considerations. He expressed hope that future governments will maintain this policy direction. Dr Mansur also urged the bank to enhance efforts in attracting remittances, supporting exporters, and identifying capable small and medium-sized enterprise borrowers at the grassroots level, as these areas are crucial for both the bank's performance and the country's economic growth.