Cheerless Outlook for Tractor Loans

Analysts says, the tractor loan portfolio is yet to see recovery, even as monsoons are expected to be above normal this year. This is at a time when overall commercial vehicle (CV) loans have started showing signs of recovery, banking on improved industrial activity.

The slower growth in minimum support price over the last two years and poor monsoons in 2014 and 2015 will continue to weigh on the performance of tractor loans. Compared to 3.1% of the average peak 180+ days past due (dpd) delinquency observed in 2011 vintage loans, post 2011 vintage loans reached over 4% of average 180+ dpd delinquency in just two years from issuance.

The delinquencies will stay close to the worst levels seen recently, it is indicated by the agency’s projection of delinquencies in tractor loans of recent vintages.

The agricultural output, though recovered from the sharp fall in March 2015 as a result of 2014’s weak monsoon, has largely been subdued in the 12 months ended September 2015. India Ratings said that the year-on-year growth in agriculture GDP stood at 2.18% in Q2FY15 compared to 2.10% in Q2FY14.

Tractor loan borrowers got help to partly absorb the impact of weak agricultural activities by the diversified usage of tractors in local transportation and other activities.