State Bank of India, the largest bank in the country, has suspended
new loans for buying tractors and other farm equipment.
The sudden decision, which according to SBI officials was prompted by
the rising bad loans, has surprised tractor makers and the farm
lobby.
"Our tractor loans now amount to around Rs 7,000 crore and 15 per cent
of which has become NPAs," said a senior SBI official.
The bank had issued circulars to all branches last week asking them to
stop new loans to purchase tractors with immediate effect. The bank is
planning a special recovery drive, for which they will also involve
tractor manufacturers, said the official in charge of rural business.
"Our aim is not to deprive funds to buy tractors. On the other hand,
our priority is to help genuinely distressed farmers. But there are
wilful defaulters in some pockets. We want to tackle that," said Anup
Banerji, Deputy Managing Director, Agri & Rural Business, SBI.
"This is a temporary measure. We hope to see some improvement in the
recovery by June, after which we will resume lending to this segment,"
said another SBI official.
Bankers are not sure whether all tractor loans would come under the
government's farm loan waiver scheme. Under the farm debt waiver
scheme announced in the Union Budget, there is a provision for a one-
time settlement under which the government will pay 25 per cent of the
loan, and the farmer will have to pay 75 per cent of the loan. "We are
guessing that the farmers who avail themselves of tractor loans may
not be small and marginal farmers who are eligible for full loan
waiver. However, they can take advantage of the one time settlement.
Yet, we are not sure," the official said.
An official with a leading tractor manufacturer said that the tie-up
with SBI has been working well.
There has been drop in sales, which was due to genuine slowdown in
demand.
SBI saw a growth of 24.6 per cent in agricultural advances for the
fiscal 2007-08.
For tractor financing, SBI has agreements with almost all major
companies such as TAFE Ltd, Mahindra & Mahindra, and Sonalika Group,
said an SBI official and the average ticket size of a tractor loan is
about Rs 4 lakh
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