The Hindu : Front Page : SBI withdraws circular, resumes tractor loans

Online edition of India's National Newspaper
Thursday, May 22, 2008
ePaper | Mobile/PDA Version

Front Page

Front Page

SBI withdraws circular, resumes tractor loans

Special Correspondent

It was only a move to reduce non-performing assets: chairman

The circular drew all-round criticism
SBI has largest farm loan portfolio

NEW DELHI: In the wake of severe criticism from various quarters, the State Bank of India on Wednesday withdrew its “misunderstood” May 16 circular with immediate effect and announced resumption of loans for purchase of tractors and other farm equipment.

In a statement issued in Mumbai, chairman O.P. Bhatt said: “We regret that our circular [asking SBI branches to put tractor loans on hold] ... has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect.”

The SBI had issued the circular, advising the branches to halt sanction and disbursal of new tractor loans in view of the mounting overdues in this segment. However, the sudden stoppage of farm loans by the country’s largest agri-lender drew flak from political parties, farmers’ organisations as also the SBI staff association.

As the largest public sector bank, the SBI has also the largest farm loan portfolio, having financed 42 lakh new farmers during April 2004-March 2008, with disbursements aggregating to nearly Rs. 70,000 crore.

Alongside, for the first time, it surpassed the 18 per cent benchmark set for agricultural advances in 2007-08 and also exceeded the priority sector lending stipulation of 40 per cent with advances at 43.53 per cent during the fiscal year.

The aggressive farm lending led to a sharp increase in tractor loan defaults in recent months. Currently, out of the tractor and farm equipment loan segment adding up to about Rs 7,000 crore, bad loans comprise nearly 17 per cent of the total portfolio leading to a sharp rise in its non-performing assets (NPAs) in the farm sector.

Mr. Bhatt said the SBI, through its circular, aimed at sensitising its branches to the need for reducing the NPAs and also helping and persuading farmers to take advantage of the government’s Rs 60,000-crore loan waiver.

“We have pockets where there are large overdues in tractor loans ... It is our attempt to sensitise our branches across the country [to rising NPAs] ... As and when this happens, the farmers would be eligible [for loans] and the bank would be willing to lend them again for agricultural activities,” Mr. Bhatt said earlier, explaining the intent of the circular, now withdrawn.

As for fiscal 2008-09, the SBI has plans to shore up its farm lending by 33 per cent to Rs. 13,400 crore and cover about one lakh “unbanked” villages by 2010.

Printer friendly page
Send this article to Friends by E-Mail

Front Page