2. INDEX
ABOUT TRACTORS
TYPES OF TRACTOR LOANS
LOAN PROCESS – STAGES
ELIGIBILITY CRITERIA
DOCUMENTS REQUIRED –
PRE & POST SANCTION DOCUMENTS
FEATURES & BENEFITS
UNDERWRITING STANDARDS OF TRACTOR LOAN
TRACTOR NOMENCLATURES
CHALLENGES IN TRACTOR FINANCE
PSL & NPA CLASSIFICATION OF TRACTOR LOANS
HARVESTOR LOANS
CALCULATION OF HAULAGE INCOME
APPRAISAL OF TRACTOR PROPOSAL
TOP TRACTOR COMPANIES IN INDIA
TOP TRACTOR FINANCIERS IN INDIA
3. ABOUT TRACTORS
TRACTOR INDUSTRY
Tractors in India is a major industry and significant contributor to its agriculture output gains.
In 1947, as India gained independence from British colonial empire, the level of agriculture
mechanization was low. The socialist oriented five-year plans of the 1950s and '60s aggressively
promoted rural mechanization via joint ventures and tie-ups between local industrialists and
international tractor manufacturers. Despite these efforts, the first three decades after
independence local production of 4-wheel tractors grew slowly. By the late 1980s tractor
production was nearly 140,000 units per year, and a prevalence rate of less than 2 per 1,000
farmers.
After economic reforms of 1991, the pace of change increased and by late 1990s with
production approached 270,000 per year. In early 2000s, India overtook the United States as the
world's largest producer of four-wheel tractors. FAO estimated, in 1999, that of total agricultural
area in India, less than 50% is under mechanized land preparation, indicating large opportunities
still exist for agricultural mechanization.
In 2013, India produced 619,000 tractors accounting for 29% of world's output, as the world's
largest producer and market for tractors. India currently has 16 domestic and 4 multinational
corporations manufacturing tractors.
The Tractor Industry of India plays an important role in the agriculture sector of India. In India,
Agriculture accounts for 25% of the GDP. The Indian Tractor Industry is the largest in the world,
accounting for one third of the global production. It is therefore considered to be a vital sector of
the Indian Economy. Since 1960, The Indian Tractor Industry has come a long way. 93% of the
tractor industry is concentrated in 12 major states namely, Andhra Pradesh, Bihar, Gujarat,
Haryana, Karnataka, Maharashtra, Madhya Pradesh, Orissa, Punjab, Rajasthan, Tamil Nadu and
Uttar Pradesh.
4. LOAN PROCESS - STAGES
APPLICATION LOGIN ALONG WITH
DOCUMENTS.
PROCESSING
SANCTION OF LOAN
DISBURSMENT
6. Application process flow
• Mortgage cases:
1.Application/ CAM submitted by sales team to credit
2. Application/ CAM screened by credit/ queries raised
3.CPV initiated
4. Credit decision
5.Legal initiated, documents execution
6.Upon receipt of legal report, mortgage process
initiated
7.Mortgage formalities over, Lawyers vetting report
received
8. File log in to OPS for disbursement.
7. Non Mortgage cases
1. Application/ CAM submitted by sales team
to credit.
2. Application/ CAM screened by credit/
queries raised.
3.CPV initiated
4. Credit decision
5. Documents execution
6. File log in to OPS for disbursement
8. ELIGIBILITY CRITERIA
Eligibility criteria for Tractor Loan
Banks have different eligibility criteria for tractor loans but here are the most
common ones:
Any individual or group of individuals which includes JLGs/SHGs, institution or
organization are eligible.
They must have sufficient income to able to repay the loan.
Ideally borrower or the borrowing body should possess a minimum land holding of
2 Acres.
Features for Tractor Loans to Look Out For
The margin percentage is important to note, which in most cases start from 15%.
Primary security of the loan is the hypothecation of Tractor and its accessories.
Insurance must be taken for the tractor with the same or any other bank as it is an
automobile and in India it is mandatory for all automobile owners to have an
insurance.
There may also be a collateral security which may be mortgage of landed property
valued equivalent of 100% of loan value.
9. Pre-sanction documents
Application form
visit report by sales officer/ RM
copy of land records – Patta pass book/ title deed/ sale deed/
adangal/ ROR( for farmers)
copy of contracts ( non farmers)
bank account statement for last 6 months, if available
repayment track records for 12 months ( not older than 1 year) (
mandatory for non farmers).
copy of IT returns/ salary slips etc.( for non farmers).
copy of GOVT Rates for Agri land issued by revenue authorities.
KYC papers – id proof, address proof, signature of all applicants .
proforma invoices for tractor/ trailers with bank hypothecation
mentioned.
10. Post sanction documents
Final invoice( for tractor/ trailer) – invoice should mention ( make and
model of the vehicle finance, engine, chassis number, detailed price break-
up, hypothecation favouring the Bank/ NBFC.
Motor insurance cover or policy for tractor/ trailer.
Margin money receipt ( disbursal will happen after receipt of necessary
margin money from the borrower either by way of cash or by cheque.
Balance amount then to be disbursed by way of managers cheque in
favour of dealer.
DPN(demand promissory Note ) along with letter of continuing security.
Loan agreement form
Letter of Hypothecation.
Banker verification
Wherever borrower or guarantor has put thumb impression in place of
signature , we require obtaining thumb impression notarised on stamp
paper for signature verification.
Mortgage deed/ declaration/ MOE as applicable in the state.
11. FEATURES / BENEFITS
• Easy loan procedure.
• Quick processing.
• Repayment period up to 5 years.
• Flexible repayment options like it can be monthly, Quarterly, Half yearly by way
of Cash/ PDC/ ECS.
• Fixed Rate of Interest throughout the tenure.
• Non- mortgage loan available.
• Low processing fee.
• low Interest Rate.
• Get up to 90% finance on your favorite tractor.
• Easy Repayment Terms
• Top ups to existing customer basis on good track.
• doorstep service – document pick up and loan process by bank representative
only
• Finance services available at tractor showrooms.
• State/ central governments providing subsidy to ST/SC s and BPL people.
• Emi is collected by collection executive at customer house if he opts for cash
mode option.
12. Underwriting standards of Tractor loans
criteria
Individuals/ sole proprietorships/ Group of
people like SHG’s/JLG’s.
Age 18 -60 years as on date of funding
Residence Owned /rented residence stability for 3 years
Minimum no of years in agriculture/tractor
hiring business
Should be well aware about
agriculture/should have enough experience
of handling tractor operations
Minimum land holding Minimum - 2 acre
LTV(MAX) Up to 90%
13. Underwriting standards of Tractor loans
Telephone owned/ PP phone- land phone or mobile is must
contact point verification CPV must be positive
Track record for farmers/ Non-farmers
Non defaulters with any BANK/ NBFC/ Financial
instituations.where the funding is based on repayment
track - repayment for atleast last 1 year should be
provided. The same should be atleast acceptable as
defined under this policy. The same should not be more
than 12 months old from the date of funding
Identity proof
passport copy/ PAN card/ Voter id card/ Driving license.
In addition to above mentioned documents, following can
also be accepted as ID proof. A) self affidavit with
photograph of the customer and his signature across duly
notarised. B). Photocopy of the bank pass book front page
giving the name, adress and photograph of the customer
attested by the bank. c) photograph attested by the
bankere on a separate paper.
14. Underwriting standards of Tractor loans
Address proof
copy of land records, ration card, property card/ tax
receipt, VAO/ VRO certificate certifying that the
applicant is a resident of village. Electricity bill( if it is
ownership proof) , municipal tax receipt, society biII,
agreement copy, telephone bill etc. for residence
ownership proof.
signature proof
copy of driving license, copy of pan card, self affidavit
with photograph of the customer and his signature
across duly notarized, present banker verification, BM
verification.
Addition documents
For Farmer customer : a) Land records as applicable in
respective states .B) copy of Govt rates for agri land. C)
Bank statement for last 6 months, if available, otherwise
a confirmation from BM that the customer does not
have SB account. D) copy of repayment track if any
15. Underwriting standards of Tractor loans
personal Guarantee
Guarantor is mandatory for all cases. Waiver
for guarantor stipulation can be considered as
deviation and will be approved as defined in
deviation matrix.
co-borrowers
co-borrower is an individual who shares ownership, possession &
repayment responsibility either as co-borrower of land or as legal
heir of principal borrower. Only family members whether co
residing or not, at the same address can be taken as co-borrowers.
Family includes only father, mother, spouse, son or daughter,
brother or sister. If the age of borrower is more than 60 years, co-
borrower must be taken and he/she should be co owner of the
land/legal heir. un related persons, friends or colleagues residing at
different addresses can not be taken as co-borrowers. co-
borrowers can also be taken to meet eligibility criteria regarding
land ownership. the co-applicant has to sign as co-borrower in all
the documents. where the main applicant is illiterate: a literate co
borrower is required to be taken. LHT in case of males and RHT in
16. Tractor Nomenclatures
• 1. Asset categorisation : A,B,C
• 2.Asset cost: Bank approved price/invoice price which ever is lower
• 3.Repayment frequency: Monthly/Bi-monthly/quarterly/Half yearly.
• 4.Repayment mode: instalments can be repaid through PDC/ECS/SI or cash.
• 5.Guarantor : Guarantor has to a person having at least net worth equal to the
loan amount.
• 6. Security: Primary security is hypothecation of tractor. In mortgage cases, land
has to be mortgage in favour of the bank.
• 7. Income received or expected from letting the tractor or hire for Agri or
transportation purpose.
• 8. Land should be in the name of borrower or co-borrower.
• 9.Tractor Experience: To considered tractor experience, the customer should own
tractor in his name for at least 2 years.
• 10. RTR : Acceptable repayment history is for the loan of at least Rs.1 Lakh for a
period of 12 months.
• 11. Minimum and Maximum loan amount : Minimum loan amount is Rs.1 Lakhs
and maximum permissible loan amount is Rs.30 lakhs per customer.
17. Challenges in tractor finance
1. Margin money
2. industry slow down
3. Natural calamities
4. Income assessment – document proofs
5. Growing competition – Higher LTV
6. Customer profile, first time borrower.
7. Less land holding and more dependents,
low income.
18. PSL & NPA CLASSIFICATION OF
TRACTOR LOANS
The following three customers segments have
been identified for tractor loans to be covered
viz..
- Farmers finance with mortgage/ non-
mortgage of Agri land.
-commercial users having income proof viz..
ITR.
- commercial users having without income
proof.
19. Asset classification of NPA
classification of TRLA
substandard assets:( 360-720 days due )a substandard
asset would be one, which has remained NPA for period
less than or equal to 12 months.
Doubtful assets: (more than 720 days)an asset would be
classified as doubtful if it has remained in the
substandard category for a period of 12 months.
Loss assets: ( 901 days (2.5 years)e amount has not been
written off wholly. In other words, such an asset is
considered uncollectible as of such little value that its
continuance as a bankable asset is not warranted
although they may be some salvage or recovery value.
20. Harvester loans
The use of combine harvesters has witnessed a sharp increase in the recent past due to increased use of
machinery for farm purposes and shortage of labourers for farm purposes. It is used on own farms as wells as
on other farmers farm thereby giving rise to custom hiring and additional income for entrepreneur who invests
in harvesters.
There are Two types of Harvesters:
A) Tractor Mounted combined Harvesters – consists of a basic combine machine and the tractor gets mounted
on top of this machine. The power for operating the machine is derives from the power take off(PTO) shaft of
the tractor. Most popularly used combine machines in India are “Balkar”,”standard” and Dashmesh.
Self propelled or track type harvesters – have the power unit inbuilt into the machine itself. These machines do
not use tractor in any way. They are not capable of traversing along distance and the light commercial
vehicle(LCV) is used to transport the machine from place to place. Fully owned subsidiary of “ CLAAS” Germany
manufactures these machines in India.
The customers may be classified into two categories based on their experience with combines:
A) Experienced user (EC) – is the segment of customers who have at least one year experience of harvester
operation This may be validated by the RC/ INVOICES of harvester owned by the customer.
B) First Time user ( FTU) – is the segment of customers who do not have prior experience of harvester
operations.
21. Calculation of Haulage income
A farmer uses tractor for various purposes
1. use on own farm for farming operations
2. Hiring it out to neighbouring farmers or other villagers for farm operations.
3. Hiring out for non-farming activities e.g. transportation, land levelling, road construction etc.
Haulage income is an important source of income for repayment of loans availed for purchase of
tractor and implements. It also ensures optimum use of tractor in a year.
How ever, with increasing tractor density, the opportunity of availability of such income has
reduced for farm operations. At the same time extensive usage in infrastructure development has
opened new vista for income.
Ideally for optimum & viable use of tractor, it should be used for a minimum of 1000 hours in year.
While calculating income from haulage, proper verification of potential available in the village
depending upon area under cultivating in the village, no of tractors in the village, irrigation
potential, industrial development, vicinity to city etc should be taken into consideration for
arriving at haulage income.
Maximum of 500 hours of usage for commercial purposes to be considered for A & A 1 customer.
Maximum of 600 hours of usage for commercial purposes to be considered for A2 Customer.
22. Appraisal of tractor proposal
• Repayment capacity of farmers will be prime factor in determining
loan amount. Holding is a deciding factor of annual agriculture
income. While using available tools to calculate income, aspects like
availability of irrigation facility, types of crops cultivated, cropping
intensity, experience of tractor operations, farmers capacity to
meet margin money requirement will be also be considered.
Additional income, if any to be considered on the basis of
documentary evidences e.g IT returns, salary slips etc.
• Quantum of loan will be decided on the repayment capacity of the
applicants based on existing income, requirements of the
applicants, resale value of the asset being financed etc.
• Calculation of income from Agriculture:
• The income from agriculture to be calculated on the basis of area
cultivated, cost of cultivation, production per acre and market price
of the produce.
