In a deficit year, most delinquent tractor loans cure after the rabi harvest. Rescheduling recovered far more than early repossession.
The numbers from the last deficit year
In an earlier year when the monsoon in the region ended well below normal, our tractor loans in the affected districts rolled into 30+ DPD at three times the usual rate after the September instalment. We treated two groups differently:
Rescheduled: the instalment was moved to after the rabi harvest. 71% of the 30+ DPD tractor loans cured within 60 days of the rabi harvest.
Repossessed early: tractors taken back in October and November were sold into a market full of other repossessed tractors. Recoveries came to 54% of the outstanding after costs.
Repossessing a tractor in a deficit year also takes away the borrower's means of earning from the next crop, which is the only way the loan gets paid.
What to do when the monsoon fails
Check the rainfall. If the district's June to September rainfall is below 75% of normal, the EWS raises E2 on tractor loans there. This year Marathwada ended at 61% of normal.
Separate cause from character. Look at the borrower's record before this season. Borrowers who paid on time through the last two harvests are the ones to reschedule.
Reschedule the September instalment to January, after the rabi harvest, under KB-005. For a whole district, prepare one note for the credit committee rather than one approval per loan.
Stay in touch monthly. Call in November and December; ask about the rabi sowing. A borrower who hasn't sown is a different case.
No repossession before the rabi harvest unless the tractor is being sold or moved out of the district (C6 or U4).
Signals to watch
Rainfall deficit (E2), DPD bucket rolls (R4), part payments (R3) and broken promises (R6). A bureau score drop (B1) in a deficit year usually reflects missed crop-loan payments and is less worrying than the same drop in a normal year.