Stung by protests from farmers, politicians and even a section of its own employees, State Bank of India on Wednesday hurriedly withdrew its controversial decision to suspend financing of farm equipment, primarily tractor loans.
“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 The circular is withdrawn with immediate effect,” SBI Chairman OP Bhatt said in a statement.
SBI, the largest bank in the country, had issued a circular to its branches asking them to stop disbursals for new tractor loans, citing a spike in bad loans in this segment. The decision sparked criticism and protest from political parties, farmers' groups and industries, especially tranctor manufacturers, that could be hit by any slowdown in lending to farm sector.
Anup Banerjee, a deputy managing director at SBI, said the circular has created some misunderstanding among the people.
“Our intent was to sensitise the borrowers to avail the facility under the loan waiver scheme that was announced by the government,” in the Union Budget. The bank would have resumed lending after the loan waivers were executed.
The government plans to execute the loan waiver plan by end of June.
When asked, if SBI would continue to give tractor loan, Banerjee said: “such decisions to take exposures or put on hold in any particular sector depend upon the performance of such sector. In case of those sector where the percentage of default is much beyond the tolerance level, we would continue to be conservative.”
SBI, the state owed bank, has the largest farm loan portfolio amongst lenders in the country. Between April 2004 and March 2008, it financed 42 lakh new farmers, Banerjee said. Disbursements during this period aggregated to around Rs 70,000 crore.
Currently, tractor and farm equipment loans from the bank total Rs 7,242 crore. Of this, about 17.8 per cent is under the default category.
Banerjee said that there were some pockets in the country where there were large overdue in tractor loans. The circular was an "attempt to sensitise our branches across the country."