State Bank of Vietnam (SBV) Governor Nguyen Thi Hong has reported to the National Assembly’s ongoing session that opened on May 22 on the government’s decision to provide additional investment of VND17.1 trillion ($721 million) in charter capital for the Vietnam Bank for Agriculture and Rural Development (Agribank) in the 2021-2023 period.

The government said the additional capital is necessary.

According to the banking sector development strategy by 2025 with a vision towards 2030 and the plan on restructuring credit institutions and handling bad debts during 2021-2025, State-owned commercial banks continue to hold an important position in terms of scale and market share, market regulation ability, and restructuring weak credit institutions. They must therefore improve their financial capacity, including supplementations to Agribank’s charter capital from the State budget.

Its charter capital currently stands at over VND34.3 trillion ($1.44 billion), which is low compared with other commercial banks. So without an increase, it would be unable to fulfill its vital role, particularly the dominant role it plays in the agriculture and rural sectors.

The increase is also aimed at helping the bank meet the minimum capital adequacy ratio (CAR), prescribed at 8 per cent from the current 7 per cent.

It will also help it expand operations, effectively contributing to the implementation of monetary policy and administration by the government and SBV.