Hit by repayment defaults in the farm mechanisation segment, the State Bank of India has temporarily suspended new loan applications to finance the purchase of farm implements like tractors and other mechanisation equipment.
In the tractor segment alone, SBI has been facing a high rate of non-payment from farmers.
Analysts say other public sector banks may take their cue from the country's largest lender to follow suit, a move that could impact agricultural productivity, a priority sector for the banking advances.
According to reports, SBI has issued a circular to all branches saying financing of new tractor and farm mechanisation rquipment, including power tillers and combine harvesters had been put on hold with immediate efect due to very high overdues from borrowers.
Commentators are of the view, that in expectation of being covered under the debt waiver schemes in an election year, such borrowers may have put off repayments. (See: Budget 2008-09: Rs60,000-crore giveaway to farmers in poll-bound budget)
The bank says it would review the decision depending on the progress achieved in bringing down the overdue payments.