For Stressed Farm Equipment Loans, SBI Offers One-Time Settlement

State Bank of India is offering to take a 40 percent haircut on stressed tractor and farm equipment loans in a one-time settlement scheme. This scheme will run till March 31.

SBI Managing Director Rajnish Kumar said that, the scheme is not a reaction to Prime Minister Narendra Modi’s promise during the Uttar Pradesh elections to waive loans of small and marginal farmers. He said, such schemes are normally considered in the last quarter of the financial year to help close accounts.

SBI’s agricultural machinery loans portfolio is worth Rs 6,000 crore, Kumar said.

"The scheme was actually approved by the board on January 25. Loans that are non-performing and fully provided for will qualify. If the borrower meets the requisite criteria, branch managers are authorised to give their approval for the scheme," said Rajnish Kumar, Managing Director, State Bank of India.

He also said that, as a result, the scheme does not entail any additional expenditure, but could potentially bolster revenue for SBI and the bank has not yet collated information on how many loans have availed the scheme so far. At the end of December last year, Loans to the agricultural sector, which also includes crop loans, accounted for a little over 8 percent of SBI’s loan book and SBI’s gross non-performing assets stood at Rs 1.08 lakh crore, or 7.23 percent, of its loan book.

Kumar said, “This (one-time settlement) is part of the normal course of business for the bank. In fact, we currently have a similar scheme which we launched in October-November for SME (small and medium enterprise) loans, where we are offering a 20 percent haircut. There is also a scheme for educational loans in certain categories.”