Sonali Bank Gains Greater Lending Flexibility After BB Policy Shift

Bangla Press Desk: The Bangladesh Bank has withdrawn lending limits that had long been imposed on five major branches of state-owned Sonali Bank, allowing the bank to approve loans without branch-specific ceilings. 

As a result, all branches will now be able to extend loans based on customer demand, subject to normal lending procedures.

According to sources, Sonali Bank had argued that maintaining the lending caps on the five branches could have an adverse impact on the economy. Following the request, the central bank decided to remove the restrictions.

The branches previously subject to lending limits were the Local Office Branch, Foreign Exchange Corporate Branch, Shilpa Bhaban Corporate Branch, Shaheed Abrar Fahad Avenue Corporate Branch, and Laldighi Corporate Branch in Chattogram. Depending on the branch, loan approvals had been capped at between Tk5 crore and Tk20 crore. With the latest decision, no Sonali Bank branch will face a ceiling on the amount of loans it can sanction.

Restrictions imposed after banking reforms and Hall-Mark scandal

The Bangladesh Bank first introduced lending limits for Sonali Bank in 2007 under a World Bank-funded reform programme for state-owned banks. Oversight was further tightened after the Hall-Mark loan scam in 2012. The measures were credited with strengthening the bank's financial position over time.

Recently, Sonali Bank sought the removal of the limits, citing growing demand from influential and large borrowers. The central bank responded positively but advised the bank to maintain strict due diligence in approving new loans and to avoid borrowers previously linked to controversial or fraudulent transactions.

Sonali Bank Managing Director Shawkat Ali Khan said the lending restrictions had prevented the bank from financing many of its best customers, who mainly deal with the five branches.

"Most of our good customers are attached to these branches. We could not provide them with loans despite demand. That is why we requested the Bangladesh Bank to withdraw the lending limits. The central bank has responded positively, and we can now finance our quality clients," he said.

Why the limits were withdrawn

State-owned banks typically have a significant concentration of lending in their principal branches, with as much as 30–40% of total loans often originating from a single branch. Business groups generally prefer these branches because of easier communication with the head office.

For Sonali Bank, about 27% of its total lending portfolio is concentrated at the Local Office Branch. To reduce concentration risk, the Bangladesh Bank had earlier capped working capital loans at Tk5 crore at that branch and Tk20 crore at the other four branches.

On 4 June, the central bank raised the Local Office Branch's lending ceiling from Tk5 crore to Tk20 crore. However, lending was restricted to existing clients and priority sectors, including cottage, micro, small and medium enterprises (CMSMEs), export-oriented industries, agro-processing, import-substitute industries, pharmaceuticals, renewable energy, manufacturing and employment-generating sectors.

In a letter sent to the Bangladesh Bank on 14 July, Sonali Bank's managing director said customers seeking quick and convenient financing were increasingly approaching the five branches, but the lending caps prevented the bank from meeting demand. 

He argued that increasing private-sector credit was important for overall economic growth and requested the complete removal of the restrictions.

The Bangladesh Bank subsequently informed the bank late last month that the branch-level lending limits had been withdrawn.

Loans approved before restrictions were lifted

Although the Local Office Branch was still subject to a Tk20 crore lending limit, Sonali Bank's board approved a Tk40 crore loan in May for Arham Multi Trading, owned by Rashedul Hasan, president of the Narsingdi Chamber of Commerce and Industry.

During the same period, the board also approved a Tk50 crore loan for Munnu Fabrics, a concern of the Munnu Group. The loan was approved at a board meeting on 13 May, the same meeting in which the resignation of Afroza Khanam, managing director of Munnu Fabrics, was accepted. She is now the minister for civil aviation and tourism.

Sonali Bank later sought special clearance from the Bangladesh Bank for both loans while also requesting the withdrawal of the lending limits. With the restrictions now removed, the bank will no longer need central bank approval to disburse such loans.

Shawkat Ali Khan said the Munnu Group loan had been approved once before but was not disbursed because of the prevailing circumstances at the time.

"The board has now approved its disbursement. Arham Multi Trading is also a good company. With the lending restrictions removed, the loan can now be disbursed in accordance with regulations," he said.

Sonali Bank's financial position

Among Bangladesh's state-owned banks, Sonali Bank is currently regarded as the most financially stable.

The bank posted a profit of Tk988 crore in 2024, which increased to Tk1,313 crore by the end of 2025, making it the country's third most profitable bank.

According to its financial statements, a significant share of the bank's earnings came from investments in government treasury bills and bonds. It currently has no capital shortfall or reserve deficiency and has performed better than other state-owned banks in managing non-performing loans.

Sonali Bank said its deposits rose to Tk179,879 crore in 2025, while its outstanding loan portfolio reached Tk104,723 crore.

Although the banking sector's overall non-performing loan ratio has exceeded 35%, Sonali Bank's NPL ratio remains around 18%. Major defaulters include the Hall-Mark Group, Beximco, Thermex, and Orion Group, which continue to weigh on the bank's classified loans.

Despite these challenges, Sonali Bank's loan-to-deposit ratio remains at around 58%.

Source: Prothom Alo