State-owned banks lend, but fail to recover loans on time: BB governor

Bangladesh Bank Governor Ahsan H Mansur has said that state-owned commercial banks disburse loans but have consistently failed to recover them on time, a weakness that has kept credit growth in the sector constrained for decades.

Speaking as a special guest at the Sonali Bank Annual Conference 2026 at the International Convention City Bashundhara today (2 February), the governor said long-standing structural problems had limited the role of government banks in the economy.

"If loans can be given to the right customers, those loans will no longer remain unrecovered," he said.

He noted that various restrictions had been imposed on government banks, including Sonali Bank, which were still in effect.

"Government banks can give loans, but they cannot recover them. For this reason, the flow of credit had to be contracted," he said.

He added that credit growth at state-owned banks had remained constrained since before 2000, which he described as an unsustainable model.

The governor said banks that mobilise deposits must also be able to channel those funds into productive economic activities.

"If a bank collects deposits and we cannot contribute that to the macro-economy, then our achievement will be diminished," he said.

He said Sonali Bank had been cautious in loan disbursement but now needed to strike a balance.

"Sonali Bank is distributing loans with great caution. I think now loans must be distributed with a bit of courage along with that," he said.

Ahsan H Mansur also pointed to the limited role of state-owned banks in consumer lending.

"The consumer lending sector is an important sector. In other countries, house lending is a very large sector, but the government banks of our country are unable to make any major contribution," he said.

He said Sonali Bank should be transformed into a fully commercial institution.

"Currently, Sonali Bank is operating as a partial commercial principal bank. It must be developed into commercial banking on a larger scale and become more profit-oriented," he said.

According to the governor, profits earned by the bank could help reduce its capital deficit and meet future capital and provisioning requirements, eventually enabling it to pay dividends.

He added that the government would give Sonali Bank the freedom to operate on true commercial principles and said future governments would maintain that approach.

He also stressed the need to increase remittance inflows, noting that Sonali Bank plays a significant role in opening letters of credit for the government.

The governor said Sonali Bank's non-performing loan ratio was at a "tolerable level" and had improved from earlier figures.

"I can expect it to decrease a bit more," he said, adding that loan disbursement needed to rise.

"If Sonali Bank takes Tk2 lakh in deposits, then 80% of that must be distributed as loans," he said, while emphasising the need for careful borrower selection.

He said banks must identify capable entrepreneurs at the grassroots level, particularly among small and medium enterprises, and strengthen support for export-oriented activities.