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 that will run till March 31.
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, SBI Managing Director Rajnish Kumar told BloombergQuint over the phone on Tuesday. Such schemes are normally considered in the last quarter of the financial year to help close accounts, he said.
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.Rajnish Kumar, Managing Director, State Bank of India
As a result, the scheme does not entail any additional expenditure, but could potentially bolster revenue for SBI, he said. The bank has not yet collated information on how many loans have availed the scheme so far, he said.
One Time Settlement (OTS) announced for #Agriculture #Loans! Scheme valid until 31st March. Contact your branch for details & benefits. #SBI pic.twitter.com/ayVd8gcdHZ
At the end of December last year, SBI's gross non-performing assets stood at Rs 1.08 lakh crore, or 7.23 percent, of its loan book. Loans to the agricultural sector, which also includes crop loans, accounted for a little over 8 percent of SBI's loan book.
“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,” said Kumar.
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