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April 12, 2024

Rural banking revamp: BSP mandates higher capital, promotes mergers for a more resilient sector

The Bangko Sentral ng Pilipinas is pushing for the consolidation of the rural banking sector to bolster its resilience.

In a recent forum, BSP Governor Eli Remolona Jr. stressed the central bank’s commitment to strengthening the industry through consolidation, with a focus on enhancing capital and facilitating mergers.

He cited the sector’s challenges, particularly its shift away from its original agricultural lending mandate towards consumer finance.

Effective September 2022, the BSP implemented increased minimum capital requirements for rural banks, setting the bar at P50 million. These requirements apply to small-scale lenders with up to five branches, regardless of their geographical location. Banks operating 6 to 10 branches must maintain a minimum capital of P120 million, while those with more than ten branches are required to secure at least P200 million.

Despite initial industry concerns over the capital hike, rural banks have been granted until 2027 to meet the specified requirements.

These developments follow the Asian Development Bank’s allocation of $655,000 to nine rural lenders and a rural bank consortium for initiatives aimed at digitalization and capacity-building.

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