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Tractor cos relying more on pvt banks, NBFCs
With tractor sales dipping, manufacturers are looking increasingly at private sector banks and non-banking finance companies (NBFC) to offer retail financing options.
Public sector banks currently insist on farmers mortgaging both land and tractor as collateral for finance. Farmers must have a minimum four acres of irrigated land to get a loan for a tractor of less than 35 horsepower (hp), and six acres for tractors above 35 hp.
Moreover, loan applications are accepted only on receipt of all documents, including details of land ownership, certificate from the Block Development Officer/Tehsildar on existing mortgage if any on the land, no-objection letters from the local cooperative society, and so on.
"Right now, it takes an average of 93 days from the time the tractor is despatched from my factory to the dealer to the payment reaching me. It takes about 45 days for the processing and disbursal of a tractor loan from the time of application," said Mr Rohtash Mal, CEO, Agri Machinery Group, Escorts Ltd.
It is this vacuum that some private banks and NBFCs are seeking to fill. ICICI , HDFC Bank , Kotak Mahindra , L&T Finance and Indiabulls Financial Services , for instance, are now offering up to 75 per cent finance without any land mortgage requirement. If the applicant has a steady other income or is an income tax payer, up to Rs 3 lakh is sanctioned as loan based on these papers. Further, loans are made mostly on the basis of referrals and pre-sanction enquiries are made within 2-3 days.
The country's No. 1 tractor maker, M&M is relying more on its NBFC arm, M&M Financial Services Ltd, to offer finance to prospective buyers. The company last month launched a countrywide 'on the spot loan mela'. Mr Choudhari said about 40 per cent of tractor sales of M&M and 25 per cent of its subsidiary, Punjab Tractors , are now being financed through its NBFC.
