The Hindu : Business : SBI puts tractor financing on hold

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Tuesday, May 20, 2008
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SBI puts tractor financing on hold

Move follows high rate of non-payment

— FILE PHOTO

A farmer ploughing his field in Punjab.

NEW DELHI: State Bank of India has put on hold financing of new tractor and other capital equipment, a move that can have an impact on the agriculture sector, a priority area for the Government.

SBI has issued a circular to all its branches, saying that the “bank has put on hold financing new tractor and farm mechanisation activities, which include power tiller and combine harvester, with immediate effect in view of very high overdues in this sub-segment of agri advances.”

Sources said that in the tractor segment, SBI had been facing a very high rate of non-payment from farmers and this was the main reason to stop financing temporarily.

“The decision will be reviewed based on the progress achieved in reduction of overdues, in due course,” the circular from the Agri Business Unit — Product Development and Management Department of SBI — said.

The bank has also asked all its branches to get in touch with tractor dealers and get details of tractor borrowers and educate them about the benefits under the debt relief scheme (one time settlement scheme) announced by the Government for distressed farmers.

Large portfolio

“Our bank has a large portfolio of tractor loan accounts with overdues and farmers in distress can avail themselves of benefit under these schemes,” the circular said.

While following the direction, all the branches have been asked to maintain secrecy on the customer account, keeping in view bank’s obligation. Sources said that SBI’s non-performing assets had increased to Rs. 12,800 crore at the end of March this year compared with about Rs. 10,000 crore a year ago.

Later, SBI spokesperson told PTI from Mumbai that “the non-performing assets in tractor financing have increased close to 17 per cent, so the decision has been taken to put on hold the financing of this segment for the time being.”

As the situation improves, an appropriate decision would be taken, the spokesperson said. On the acceptable limit of NPAs in this segment, the spokesperson said “there is no such level of NPAs. As and when we feel comfortable, we will start the financing again.” — PTI

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