Kiwibank will have to prove itself before increased capital can result in the desired levels of competition

Finance Minister Nicola Willis has announced the bank's parent company is being allowed to raise 500-million dollars from investors to help it compete with the four major banks.

The terms and conditions are yet to be negotiated and approved.

Bagrie Economics Managing Director Cameron Bagrie says the move will be a good thing, depending on investors' returns.

He says the challenge for Kiwibank will be to get both good market share, while delivering results because investors won't put 500-million into the business for nothing.