Bangladesh Bank Lifts Lending Cap on Sonali Bank Five Major Branches

Dhaka, August 4, 2026 — The Bangladesh Bank (BB) has withdrawn the lending ceiling imposed on five major branches of Sonali Bank, allowing the country's largest state-run commercial bank to approve loans without branch-specific limits for the first time in nearly two decades, officials confirmed.

With the decision, all branches of Sonali Bank will be able to sanction loans based on customer applications, subject to the bank's internal procedures and broader regulatory requirements. The move marks a significant shift in the central bank's approach to oversight of state-owned lenders, while signalling confidence in Sonali Bank's improved risk management capabilities.

🏛️ Why the Cap Was Lifted

According to sources familiar with the matter, Sonali Bank had informed the central bank that retaining the lending restrictions on its key branches could adversely affect economic activities by slowing the disbursement of large loans — particularly to corporate clients, industrial conglomerates, and trade finance customers who depend on the bank's major corporate branches for working capital and project financing.

Following the request, the central bank decided to lift the ceiling, according to local media reports. The decision reflects a balancing act between maintaining regulatory safeguards on state-owned banks and ensuring that lending channels remain sufficiently agile to support economic activity at a time when private sector credit growth has been sluggish.

📍 The Five Affected Branches

The lending cap withdrawal applies specifically to five major Sonali Bank branches that previously operated under branch-specific lending limits. These branches handle a disproportionate share of the bank's corporate and trade finance business, making the cap particularly constraining for large-scale lending operations.

• 🏢 Local Office Branch
• 🌏 Foreign Exchange Corporate Branch (handles trade finance and FX operations)
• 🏭 Shilpa Bhaban Corporate Branch
• 🧡 Shaheed Abrar Fahad Avenue Corporate Branch
• 🌏 Laldighi Corporate Branch in Chattogram (key port city operations)

Previously, these branches could not approve loans beyond prescribed limits, which generally ranged between Tk 50 million and Tk 200 million, depending on the branch. With the restrictions removed, no Sonali Bank branch will remain subject to a branch-specific lending cap — though all lending will still need to comply with the bank's overall exposure limits and Bangladesh Bank's broader prudential regulations.

📜 Historical Context: 2007 Reform and 2012 Hall-Mark Scandal

The Bangladesh Bank first introduced lending limits for Sonali Bank in 2007 under a World Bank-supported reform programme for state-owned banks. The reform package was designed to strengthen risk management at state-owned lenders, which had long been vulnerable to political interference and directed lending practices that compromised credit quality.

Oversight was tightened further after the Hall-Mark loan scam in 2012, in which Sonali Bank's Ruposhi Bangla Hotel branch was defrauded of approximately Tk 36 billion through forged documents and fictitious export contracts. The scandal became one of the largest banking frauds in Bangladesh's history and triggered sweeping reforms in how state-owned banks managed credit risk, collateral verification, and branch-level oversight.

The branch-specific lending caps were a direct response to the Hall-Mark scandal — an attempt to ensure that no single branch could approve large loans without additional scrutiny from head office and the central bank. The fact that these caps are now being lifted suggests that Bangladesh Bank is satisfied with the improvements Sonali Bank has made to its internal controls and risk management systems over the intervening decade.

⚠️ Conditions Attached: Strict Scrutiny Required

Although the central bank approved Sonali Bank's request to lift the caps, it attached important conditions. BB advised Sonali Bank to maintain strict scrutiny while sanctioning fresh loans and to avoid lending to borrowers previously involved in controversial or alleged irregular transactions.

The caution is significant, because the lifting of branch-specific caps increases the discretion of branch managers and credit committees — a level of autonomy that has historically created vulnerabilities in state-owned banks. Bangladesh Bank's emphasis on continued scrutiny signals that the regulatory relaxation is conditional, not unconditional, and that any recurrence of the kind of lending practices that led to the Hall-Mark scandal would likely trigger a reinstatement of the caps.

📊 Implications for Credit Growth

The lending cap removal comes at a critical moment for Bangladesh's credit market. Private sector credit growth has been weak in recent months, constrained by high interest rates, banking sector stress, and elevated non-performing loan ratios that have made banks cautious about extending new credit. By allowing Sonali Bank's major corporate branches to lend without branch-specific caps, BB is effectively expanding the channel through which large loans can flow to the private sector.

For trade finance specifically, the lifting of caps on the Foreign Exchange Corporate Branch and the Laldighi Corporate Branch in Chattogram — the country's main port city — could improve the speed and flexibility with which export-oriented businesses can access working capital. This is particularly relevant given the ongoing challenges facing Bangladesh's export sector, including weak global demand, US tariff pressure, and the gas crisis that has constrained industrial production.

🏛️ Sonali Bank's Strategic Position

As the country's largest state-run commercial bank, Sonali Bank occupies a unique position in Bangladesh's financial system. The bank handles a significant share of government banking business, manages remittance inflows from Bangladeshi workers abroad, and serves as a key lender to both private sector corporates and state-owned enterprises. The removal of lending caps on its major branches therefore has implications that extend well beyond the bank itself — affecting the broader credit environment for trade, industry, and infrastructure finance.

The decision also reflects a broader regulatory philosophy shift under the current Bangladesh Bank leadership, which has signalled a willingness to relax prudential restrictions on state-owned banks in exchange for stronger internal governance commitments. Whether this approach delivers the intended boost to credit growth without reigniting the lending scandals of the past will depend largely on how rigorously Sonali Bank implements the scrutiny standards that BB has mandated.

📋 Strategic Context

The lending cap removal takes on added significance against the backdrop of Bangladesh's broader macroeconomic challenges. With the government targeting 7 percent GDP growth by 2029 under the LDC graduation roadmap, private sector credit growth needs to more than double to above 10 percent within three years. Sonali Bank's ability to lend without branch-specific caps could contribute meaningfully to that goal — provided the new lending flows into productive investment rather than speculative or politically-directed channels.

For Bangladesh Bank, the decision represents a calculated regulatory bet: that the improvements in Sonali Bank's risk management since the Hall-Mark scandal are sufficient to justify greater autonomy, and that the boost to credit disbursement will outweigh the risks of relaxed oversight. The success or failure of that bet will be visible in the coming quarters through Sonali Bank's loan growth, asset quality, and any emergence of fresh irregularities.