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State Bank move on farm loans draws flak

NEW DELHI: The sudden and unilateral move by State Bank of India (SBI) to put on hold financing of new tractors and other mechanised farm equipment such as power tillers and combine-harvesters with immediate effect, in view of very high loan arrears and rising non-performing assets, drew severe flak from various quarters on Tuesday.

Joining the fray in demanding an immediate withdrawal of the “anti-farmer” circular issued by the country’s largest lender to all its circle branches on Friday last week were a number of farmer organisations, tractor manufacturers and some of the leading apex chambers, apart from political parties cutting across party lines.

In a letter to Prime Minister Manmohan Singh, Consortium of Indian Farmers Associations (CIFA) Secretary General P. Chengal Reddy pointed out that the “knee-jerk” reaction of SBI was “unwarranted, uncalled for and sets a dangerous precedence”.

On behalf of the CIFA, Mr. Reddy argued that since there was inordinate delay in announcing the details of the loan waiver scheme which is based on the criteria of acreage instead of net income or loan amount, any sensible borrower would wait for the detailed programme of implementation of the scheme.

“For this natural response, which is temporary, SBI’s unthinking reaction is anti-farmer, anti-growth and is a slap on the cheek of the Prime Minister, the Finance Minister and the Agriculture Minister who conceived this bold scheme, as repayment of debt to farmers,” he said.

Mechanisation, he said, was one of the means to improve productivity and this sudden stoppage of loans for mechanisation went against the efforts to improve productivity, especially in these days of global food crisis.

“Hope that better sense prevails with the bigwigs of SBI and they will reverse their decision of stopping loans for mechanisation, which is counterproductive,” he said and requested the Prime Minister to instruct the bank to withdraw the orders “before other banks follow the cue of the biggest bank and they too stop loans”.

Fearing a fall in tractor sales, owing to SBI’s move, Tractor Manufacturers Association (TMA) President L. D. Mittal said: “This is bound to impact farm machinery sales, farm productivity and foodgrain production.

“SBI is the leading financier of the farm machinery business and this move during the peak agricultural season, when farmers need these loans most, will adversely affect the agriculture and economic growth”.

In a statement, Mr. Mittal said in a scenario of rising inflation, particularly with respect to input costs to farmers and food prices, productivity was critical to income for the farmer and control on food prices. This move would adversely affect both, he said.

The proposals in the Union Budget regarding loans to the farm sector, the TMA chief said, were very well received and the positive sentiment so generated “now stands severely dampened.

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