The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) is seeking the Finance Ministry's approval to raise its authorised capital by 10 billion baht to prepare for implementation of the new accounting reporting standard.
The bank needs larger provisions to comply with International Financial Reporting Standard 9 (IFRS 9), so it has asked the Finance Ministry for the capital increase, said president Apirom Sukprasert.
The ministry recently allowed specialised financial institutions (SFIs) to delay adopting IFRS 9 for an additional five years from 2020 to give them more time to prepare.
IFRS 9 is replacing International Accounting Standard 39 (IAS 39). Under IFRS 9, the accounting practices for banks will be tightened, particularly for loan classification and loan-loss provisions.
In addition to the 10-billion-baht hike in registered capital, the BAAC will raise paid-up capital in phases depending on financial necessity, Mr Apirom said.
The ministry injected a combined 4 billion baht into the BAAC by using the bank's remittance in subscribing to the newly issued shares before the State Enterprise Policy Office clearly stated that state enterprises' remittances must be directed to the government's coffers, not newly issued share purchases.
If the ministry approves the request, the BAAC's authorised capital will be increased to 80 billion baht from 70 billion.
The bank's paid-up capital of 50 billion baht remains sufficient for its loan extensions, Mr Apirom said.
The BAAC's capital adequacy ratio is relatively high at 11.8%, well above the Bank of Thailand's minimum requirement of 8.5%.
Mr Apirom said the farm bank extended loans worth 678 billion baht to stimulate the rural economy in its financial 2018, adding that loans outstanding reached 1.45 trillion at the end of March.
The bank's financial year runs from April 1 to March 31.
Bad loans fell to 3.87% of the BAAC's total loans at the end of financial 2018 from 4.34% at the end of the preceding financial year.
For this financial year, the BAAC targets lending 770 billion baht.
The bank focuses on loans to small and medium-sized enterprises to enable them to take a lead in their supply chain to boost the income of farmers in the supply chain.
