In a sudden volte-face, the country’s largest commercial bank State Bank of India (SBI) has withdrawn its earlier circular suspending tractor loans with immediate effect. “We regret that our circular dated May 16, 2008, concerning tractor loans has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect,” SBI chairman O P Bhatt said. Though SBI did not give any reason for the move, banking sources attributed the decision to intense pressure from all sides.“The move to suspend loans by SBI, which is the leading lender in the segment, could have been misconstrued as an anti-farmer measure,” observed an analyst. SBI’s exposure to the tractor and power-tiller segment is around Rs 7,000 crore. What forced it to suspend tractor loans is high non-performing assets (NPAs) in this segment which have grown substantially to 15-17 per cent, a level considered beyond tolerable levels.After the Union government announced the Rs 60,000 crore farm loan waiver scheme in the Budget, many farmers who have availed of tractor loans started defaulting on repayments, forcing SBI to suspend such loans. On the other hand, SBI’s gross NPAs had already jumped by 28.3 per cent to Rs 12,837 crore during 2007-08. The bank said that the government’s scheme provides for debt relief to the extent of 25 per cent in case of farm equipment loans, if the farmer brings in 75 per cent of the loan outstanding. “In the past year, SBI’s NPAs in the agriculture sector have risen significantly. We have pockets in the country where there are large overdues in tractor loans. It is our attempt to sensitise our branches across the country to help the farmers to take advantage of the Government’s scheme and to reduce NPAs for the bank,” the SBI chairman explained.Highlighting the bank’s “commitment to strengthen” its agri-portfolio, Bhatt added, “for the first time in 2007-08, (the bank) surpassed the 18 per cent benchmark (18.37 per cent) set by RBI for agricultural advances. This was 14.49 per cent for the year ended March 2007.” Similarly, the bank surpassed the 40 per cent stipulation for priority sector advances, which stood at 43.53 per cent for the year ended March 2008. This was 38.52 per cent for the year ended March 2007. “There is no slowdown in agricultural loans. During the period April 2004 to March 2008, the bank financed 42 lakh new farmers. During the same period, its agri-advances have more than trebled. Further, disbursements during the period aggregated Rs 70,000 crore,” Bhatt pointed out.
