Agribank chairman proposes additional capital injection
Agribank chairman proposes additional capital injection
During a recent conference reviewing Agribank's activities in the first half of 2023, chairman of the Board of Directors Pham Duc An put forward a proposal to increase the bank's charter capital. The move aims to ensure sufficient funds to support the bank's credit expansion goals.
The National Assembly had previously approved a resolution granting Agribank a maximum additional charter capital of VND17.1 trillion ($712.5 million) for the 2021-2023 period. However, An stated that this increased capital would only be adequate to sustain Agribank's credit growth until 2024.
To achieve a targeted 10 per cent credit growth by 2025, An expressed the need for the government to provide additional charter capital of VND10 trillion (approximately $416.7 million) to Agribank.
An highlighted that the tight monetary policies implemented by major economies to control inflation, prolonged strategic competition, and trade restrictions have significantly affected business operations. These factors have led to decreased domestic and international demand, increased inventory levels, and a notable decline in economic and trade relations.
Despite Agribank's implementation of various measures, credit growth has remained low. Even with reduced lending interest rates ranging from 2-4 per cent (depending on the customer segment), and the organisation of numerous working delegations to assess the causes and identify solutions, credit expansion has not reached the desired levels.
An attributed Agribank's low credit growth to seasonal factors inherent in agricultural activities, as well as customers failing to meet loan conditions.
Some have borrowed from Agribank to repay debts at other financial institutions or to restructure their finances, while others have used borrowed funds to repay issued bonds without fulfilling the loan requirements.
Additionally, a subset of customers, operating in a state of inactivity due to limited market demand, does not express borrowing needs. In some cases, customers with the available funds to make repayments opt to reduce their debt burden, anticipating a future business recovery.
Within the current economic landscape, fiscal policies are expected to play a vital role. Unlocking investment in public projects will contribute to resource availability and stimulate domestic demand.
Furthermore, An urged the government to establish mechanisms that enhance the autonomy and responsibility of state-owned enterprises and state commercial banks. Prioritising target management over behaviour management, this approach would empower state commercial banks to be proactive, flexible, and innovative with their tech investments.
Collaboration with fintech companies could also facilitate the development of new service products in a timely manner, meeting the competitive demands.
Looking ahead, An expressed hope that the government would submit a proposal to the National Assembly in 2024. This proposal would allow for an annual increase in Agribank's charter capital using the bank's profits that have contributed to the state budget.
