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Under attack, SBI resumes farm implements loans

Under attack, SBI resumes farm implements loans
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First Published: Wed, May 21 2008. 02 39 PM IST
Updated: Wed, May 21 2008. 02 39 PM IST
Mumbai : Facing severe criticism both from political parties as well as farmers, State Bank of India today announced recommencing loans for purchasing farm implements.
Consequently, the bank withdrew its earlier circular that outlined suspension of financing of new tractors and farm mechanisation equipment with immediate effect.
“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 The circular is withdrawn with immediate effect,” SBI Chairman O P Bhatt said in a statement here.
On 16 May, SBI had issued a circular to its branches asking them to stop disbursals of new tractor loans, citing rising bad loans in this segment.
This decision of the country’s largest agri-lender, drew protests from across the country.
SBI has the largest farm loan portfolio amongst lenders in the country and in the period between April 2004 to March 2008, SBI financed 42 lakh new farmers.
Disbursements during this period aggregated to around Rs70,000 crore.
In FY 2007-08, SBI, for the first time surpassed the 18% benchmark set by the apex bank for agricultural advances as against 14.49% in FY’07.
Similarly, SBI also surpassed the 40% stipulation for priority sector advances, which stood at 43.53% in FY’08 as against 38.52% in FY’07.
However, the bank had seen a sharp rise in defaults in its tractor loans in recent times, which prompted its management to issue the circular on 16 May.
Presently, tractor and farm equipment loans of the bank stands at around Rs7,000 crore while bad loans comprise around 17% of the total portfolio.
Bhatt also said that the bank wanted to sensitise its branches to reduce the NPAs for the bank and also to help farmers take advantage of the Rs60,000 crore waiver programme of the government.
He also said that the bank’s Non-performing Assets (NPAs) in the agriculture sector had risen significantly in the past year.
“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 (about rising NPAs)...As and when this happens, the farmer would be eligible (for loans) and the bank would be willing to lend them again for agricultural activities,” he said.
The bank has plans to scale up its agri-lending by 33% to Rs13,400 crore in FY 09 and cover around one lakh unbanked villages by 2010, he said.
Besides, the country’s largest lender also has plans to extend additional credit linkage to two lakh self-help groups across the country this year.
The bank has credit-linked above 10 lakh SHG groups till the last fiscal.
SBI has also plans to issue one crore SBI Tiny cards by March, 2010 while 40 lakh cards will be issued this year, Bhatt said.
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First Published: Wed, May 21 2008. 02 39 PM IST