SBI Launches Single Settlement Program for Tractor Loans


The State Bank of India (SBI) has launched a one-time settlement program for borrowers in default on loans taken out to purchase tractors.

The country’s biggest bank has also expressed reservations against the decision to forgo agricultural loans, saying it will affect the repayment culture in the country.



SBI executives said the tractor loan portfolio is part of the bank’s agricultural loan portfolio and that the bank regularly announces settlement plans to get rid of bad debts where the prospect of recovery was weak after building up adequate provisions for these failed assets.

The tractor loan settlement program began early last month and will run until March 31. The scheme was for loans disbursed before September 30, 2011 and had up to Rs 25 lakh outstanding as of September 2016, SBI Managing Director Rajnish Kumar said. SBI will take a 40% haircut on these loans.

In a portfolio of over Rs 4,000 crore of tractor loans, around Rs 800 crore will be eligible for the scheme. Crop failure and the inability to deploy tractors are some of the reasons the loans went bad, SBI executives said.

In May 2015, SBI announced a “loan resolution week”, asking borrowers with non-performing assets to “try to find a solution”. The scheme was available to all borrowers except voluntary defaulters. Kumar said the bank has yet to hear anything specific from the government on an agricultural loan waiver.

The SBI had opposed in 2014 the waiver of agricultural loans in Andhra Pradesh and Telangana.

“Uttar Pradesh and Punjab account for 10% of (agricultural) lending and we are waiting to understand the contours of the waiver. The impact will be greater on public banks than on private banks,” Kotak Institutional Equities said in a research note.

Dear reader,

Business Standard has always endeavored to provide up-to-date information and commentary on developments that matter to you and that have wider political and economic implications for the country and the world. Your constant encouragement and feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these challenging times stemming from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative opinions and incisive commentary on relevant topical issues.
However, we have a request.

As we battle the economic impact of the pandemic, we need your support even more so that we can continue to bring you more great content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism we are committed to.

Support quality journalism and subscribe to Business Standard.

digital editor

Comments are closed.