SBI slips on tractor loan settlement plan

State Bank of India’s one-time settlement (OTS) scheme for tractor loans has failed to get adequate response.

Only Rs 24 crore worth cases have come under it. In a portfolio of around Rs 4,000 crore of tractor loans, about Rs 800 crore worth loans were eligible for the scheme. The bank is assessing reasons for the lukewarm response, and might look at extending the March 31 deadline.

Crop failure and inability to deploy tractors were some of the reasons for the loans turning bad, SBI executives said.  

The lender saw better traction with its OTS scheme for small and medium enterprises (SMEs). The scheme received 2,772 applications (Rs 671 crore), out of which 2,703 applications (Rs 647 crore) were approved.

The schemes were floated as a part of a process to clean up the books, after making prudential provisions for non-performing loans. The tractor loan book was part of the bank’s farm loan portfolio and the lender announced a settlement scheme to shed debts with prospects of low recovery, after adequate provisioning. SBI was to take a haircut of 40% on these loans. 

Many SMEs have been hit as customers payments dipped. Their incremental capacity to service loans was under severe pressure.