Bangladesh Bank removes loan limits on Sonali Bank, allowing lending flexibility

The Bangladesh Bank has withdrawn the lending limits previously imposed on five major branches of the state-owned Sonali Bank. As a result, the bank will now be able to extend loans without branch-specific lending caps, subject to customer applications and applicable regulations.

Sonali Bank had informed the central bank that retaining the lending restrictions would adversely affect the economy, prompting the Bangladesh Bank to take this decision.

The lending limits had long applied to Sonali Bank's 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, customers could previously obtain loans of no more than Tk 50 million (5 crore) to Tk 200 million (20 crore). With the withdrawal of these limits, no branch of Sonali Bank will now face restrictions on the amount of loans it can sanction.

The Bangladesh Bank first imposed lending limits on Sonali Bank in 2007 under the state-owned bank reform programme financed by the World Bank.

It further strengthened its oversight of the bank following the Hall-Mark financial scandal in 2012. These measures gradually helped strengthen the bank's financial position.

More recently, Sonali Bank sought the removal of the lending caps following pressure from influential clients, and the Bangladesh Bank responded positively.

However, the central bank has advised the bank to conduct thorough due diligence before approving new loans and to avoid extending credit to previously controversial or accused borrowers.

When contacted, Sonali Bank Managing Director Shawkat Ali Khan told Prothom Alo by telephone on Sunday, "Our five branches were subject to lending limits. Most of our good customers are attached to these branches. We were unable to provide loans even when they applied. Therefore, we requested the Bangladesh Bank to withdraw the lending restrictions. The central bank responded positively. We can now provide financing to our good customers."

The local office branches of state-owned banks generally account for a substantial share of their total lending. In many cases, between 30 and 40 per cent of a bank's total loan portfolio is concentrated in a single branch.

Business clients typically prefer branches associated with the head office or other key corporate branches because they offer easier access and communication.

For this reason, the Bangladesh Bank originally imposed lending limits on these five branches. Of Sonali Bank's total loan portfolio, around 27 per cent is concentrated in its Local Office Branch.

Consequently, the central bank capped working capital loans at Tk 50 million (5 crore) per customer at that branch and Tk 200 million (20 crore) per customer at each of the other four branches.

Following Sonali Bank's application, the Bangladesh Bank increased the lending limit for the Local Office Branch from Tk 50 million to Tk 200 million on 4 June.

However, it advised the bank to confine these loans to existing customers as well as cottage, micro, small and medium enterprises (CMSMEs), export-oriented industries, agricultural processing, import-substitution industries, pharmaceutical manufacturing, renewable energy, production and employment-generating sectors.

In a letter sent to the Bangladesh Bank on 14 July, Managing Director Shawkat Ali Khan stated that customers seeking quick and convenient access to credit were approaching those five branches.

However, the existing lending restrictions prevented the bank from meeting customer demand. He also noted that increasing credit flow to the private sector was essential for supporting overall economic growth and requested the removal of the lending caps.

At the end of last month, the Bangladesh Bank formally withdrew the restrictions and notified Sonali Bank of its decision.

Although the lending limit for Sonali Bank's Local Office Branch was Tk 200 million (20 crore), the bank approved a Tk 400 million (40 crore) loan for a company named Arham Multi Trading in May.

Records show that Rashedul Hasan, the proprietor of Arham Multi Trading, is the president of the Narsingdi Chamber of Commerce and Industry.

During the same period, Sonali Bank's Board of Directors approved a Tk 500 million (50 crore) loan for Munnu Fabrics, a company under the Munnu Group, which is also a client of the Local Office Branch.

The board approved the loan at its meeting on 13 May. At the same meeting, it also accepted the resignation of Afroza Khanam as managing director of Munnu Fabrics. She currently serves as the Minister for Civil Aviation and Tourism.

Sonali Bank subsequently submitted the documents relating to both loan approvals to the Bangladesh Bank and sought special no-objection clearance.

At the same time, it requested the withdrawal of the branch lending limits. However, the central bank removed the lending restrictions, meaning these loans will no longer require Bangladesh Bank's approval before disbursement.

Sonali Bank Managing Director Shawkat Ali Khan also said, "The loan for the Monno Group had been approved once before. However, due to the circumstances at the time, the group did not receive the facility. The Board has now approved its disbursement. In addition, Arham Multi Trading is a good company. Since the lending limit has been withdrawn, the company will now receive the loan in accordance with the regulations."

Among the state-owned banks, Sonali Bank is currently in the strongest financial position. The bank recorded a profit of Tk 9.88 billion (988 crore) in 2024, which increased to Tk 13.13 billion (1313 crore) by the end of 2025.

Based on profit, Sonali Bank ranked as the country's third most profitable bank among both public and private sector banks at the end of last year.

According to its financial statements, a significant portion of the bank's profit came from investments in government bills and bonds.

The bank currently has neither a capital shortfall nor any deficit in its statutory reserves. Compared with other state-owned banks, it has also maintained stronger management of non-performing loan risks.

According to Sonali Bank, its total deposits rose to Tk1.79879 trillion (179879 crore) in 2025, while its outstanding loan portfolio increased to Tk 1.04723 trillion (104723 crore).

Although the banking sector's overall non-performing loan ratio has exceeded 35 per cent, Sonali Bank's non-performing loan ratio remains at 18 per cent.

The bank's list of major defaulters includes the Hall-Mark Group, Beximco Group, Thermax Group, and Orion Group, among several others. As a result, the volume of non-performing loans has not declined. Nevertheless, Sonali Bank's loan-to-deposit ratio remains at approximately 58 per cent.