The Hindu Business Line : Tractor makers see sales taking a knock

Chennai, May 20 The announcement by State Bank of India, the largest bank in the country, suspending new loans for buying tractors and farm equipment has evoked mixed response amongst financiers and manufacturers.

Tractor manufacturers are of the view that other nationalised banks would follow suit hampering the growth of tractor segment, which has witnessed about 5 per cent drop. More than 95 per cent of the sale is financed and close to 80 per cent is done through SBI.

In-house funding

Industry analysts view this as an opportunity for the tractor manufacturers with an in-house financing arm. For instance, the largest tractor manufacturer in the country - Mahindra & Mahindra, the largest exporter of tractors from the country, John Deere, and utility vehicle and tractor manufacturer - International Tractors have their own retail financing arm. These companies would push sales by diverting loanees to their financing arm and end up benefiting on two counts. First, it will not affect their sales despite SBI’s decision to suspend loans for tractors and implements, and second, it will also give a fillip to the financing division and enhance top line of the group.

Those tractor manufacturers who do not have their own financing arm could lose business. However, TAFE, the second largest player in the country, could be an exception thanks to its links with a number of financiers.

It may be noted that the largest private sector bank, ICICI Bank, did not focus on funding tractors in fiscal 2008 and so the share of finance by SBI went up by 5 per cent. With SBI announcing its decision to suspend new loans, there may just be a possibility that ICICI might renew its focus in this area.

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SBI suspends loans for buying tractors, farm equipment

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