Dhaka, Feb. 2 -- 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 in Dhaka, Dr Mansur said weak borrower selection remains a major factor behind rising defaults, adding that improving credit appraisal is essential to keeping loans from turning non-performing.

Years of tight regulatory controls have made state banks excessively cautious, constraining credit growth and limiting their contribution to the broader economy, the Governor said.

Banks to remain closed for 4 days

While such caution was once necessary, h...