SBI takes OTS route to expedite recovery of bad tractor loans

Country’s largest lender State Bank of India has announced a unique settlement scheme (OTS) worth Rs 6,000 crore for tractor loans. Managing Director of SBI, Rajnish Kumar said in a statement that the lender will take a haircut of more than 35 percent on hanging tractor loans as of September 30, 2016.  He added that the accounts in the category of doubtful or loss as of September 30 will be eligible for this offer. March 31 is the last day of submission of proposals.

The bank has already issued specific circulars in early February by empowering the managers with the power of waiving loans. During the campaign in UP, Prime Minister Narendra Modi promised a loan waiver to UP farmers. SBI’s agriculture lending book in UP is worth Rs 12,000 crore. Kumar believes that this OTS route will expedite the loan recovery process and will reduce the piling NPAs. Before this SBI has also announced OTS schemes to recover education and SME loans.

India’s state-owned banks control three-fourth of the assets of the Rs 83 trillion local banking industry and they are presently combating the soaring number of bad loans. The mounting bad loans are threatening their growth prospects and draining their capital base which is not good for the banks. So experts believe that this move of SBI is timely and apt. Some of the industry observers question the relevance of this move as they believe that loan disbursal is far easy from recovering the same.

The bank should act before the loan gets completely bad. Now banks monitor all the bad loans closely through multiple channels. In the last few years, SBI has formed three committees to deal that monitor all the bad assets ranging between Rs 50 to Rs 100 crore. The industry insiders think this gesture is will help the bank to fish out bad loans in the agriculture sector, which constitutes more than 18 percent of SBI’s total gross non-performing assets (NPAs).