Hit hard by sticky assets in the tractor & power tilling equipment segment, the country?s largest bank, State Bank of India (SBI), has put a temporary ban on further credit to this segment. This ban takes effect immediately, the bank said on Monday.
The bank has issued a circular to all branches to this effect. ?The bank has put on hold financing new tractor & farm mechanical instruments, which include power tiller & combine harvester, with immediate effect in view of very high overdues in this sub-segment of agri-advances,? said the circular.
The bank, which has an exposure of Rs 7,000 crore & gross non-performing assets of 17% in this segment, has decided not to resume the portfolio until sufficient recovery happens.
Confirming the development, Shyamal Acharya, chief general manager, SBI, said, ?The bank considers gross NPA of 17% is high, and this is making the portfolio unviable. However, other segments in the agri-financing and priority sector lending will continue to be funded as usual.??
According to Acharya, the bank has not set any time limit for withdrawing the credit ban.
The bank also says the ban would not be detrimental to smaller farmers. ?It would not hit any small farmer, as generally tractor financing is availed of by richer farmers,? Acharya explained.
However, if any small farmer, who has availed of tractor financing, is covered under the debt waiver scheme of the government, the recovery for that will be made from the government scheme, and then fresh loans to the farmer will be resumed.
The bank has 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, more particularly the one-time settlement scheme announced by the government for distressed farmers. ?Our bank has a large portfolio of tractor loan accounts with overdues, and farmers in distress can avail of benefit under these schemes,? the circular said.