Tractor Financing - Isn't it Risky ?

Originally Written on April 1, 2017 - Reproduced as is, and may represent some facts relevant to those times. Yet the concepts are still strong and valid.

One of the hot topics that gets discussed when many fellow colleagues handling similar portfolios meet is about the recent trend / demand of including tractor loans as part of the waiver schemes. Hence the critical questions would be :

(a)   Are there true Early Warning Indicators for the performance of Tractor Loans ?

(b)   Is there a link between Usage - Profile - Lag Payment Patterns - Cash Cycles ?

(c)   In the current day context, does a scenario of " Agri " customer  with " Own " Use exist  ?   Or is it a misused myth ?

(d)   Many believe a proper cash viability to be critical in proper assessment. Would this be true ?

The objective of this little blog is set the thought process rolling. It is not to establish and pronounce judgement stating - " this approach is right " and " that approach is wrong ".

However, in the drive to find answers to some of these questions, some lovely thumb rules came up. Our approach is defined by us. Yet if these ground realities are taken care, probably some correlations may come up. Worth a try...

1.   Any tractor issue tracked within 90 days provides some kind of answers. Anything not followed up continuously for a period of 21 days exceeding 90 days, has higher propensity to go bad.

2. Any account which starts having delays within the first months of disbursement needs to be re-visited immediately. There are likely to be hidden truth which will emerge.

3.  Viability indicating STRONG Character ( 3 - 4 times of installments ) should be vetted for accuracy of information and should never be seen in any delay buckets. If seen even in 0 - 30, it is indicator of missing information.

4.  In case where ownership of Agri land is less than 20 Acres, possibility of the profile depending on Agri (Captive) Income alone as repayment basis is very low.  

5. FI is critical in the whole deal. Tracking and Follow up is the next critical aspect. Tractor will yield money. Fight for every penny lent ! It will come.

If the right experience, infrastructure, and backing is there, tractor financing will be one of the best portfolios a financier in india can dream of  -  a portfolio that satisfies counts of  -  Growth (book building), Profitability, PSL Satisfaction, Collateral Satisfaction, Agri Mechanization Focus etc.

Yes, this portfolio has the capacity to spin gold.... the magic lies in the hands of the beholder !