The plan is intended to reduce the number of small rural commercial banks so that the survivors can accumulate more capital and use modern technology.
It will also reduce segmentation of the rural credit market, says the central bank.
The SBV says that rural joint stock commercial banks with sufficient capacity will be encouraged to convert into urban joint stock banks.
Others can operate as rural or urban joint stock banks as long as they are able to raise their capital.
Those unable to do so will have to merge with financially-strong banks or be liquidated.
Rural joint stock banks with limited capital, poor technology and services will find it difficult to compete with rival State-owned, urban joint stock and international commercial banks following the entry into the World Trading Organisation (WTO).
Of the 20 rural joint stock banks, ten of them have been transformed from credit cooperatives between 1990-1996 and only seven have survived.
Source: Vietnam News, 17/08/2006
Banks asked to raise more capital or close
The State Bank of Vietnam (SBV) has approved a plan that will revoke rural joint stock banks' charters if they continue to have poor performances or do not raise their existing capital.