Kotak Bank sees growing demand for used-tractor loans
Kotak Mahindra Bank said it expects financing for used tractors to grow faster than new tractor funding due to the rising prices of new tractors and the higher cost of labour.
“Tractor prices have gone up by 2025 per cent in the last two years. This has a definite impact on affordability,” said Shripad Jadhav, President, Retail, Agriculture and Gold Loans.
This is also being reflected in FY24’s tractor sales, which are expected to be 78 per cent lower compared with a growth of 12.2 per cent in FY23, he added.
“There is also a labour shortage, and the cost of labour has gone up significantly for agricultural activities like land preparation, transportation and harvesting. Tractor usage is becoming imperative for these activities, which is also supporting demand,” Jadhav told businessline.
TRACTOR DEMAND
In addition, small landholding farmers are opting to buy lower horsepower (HP) tractors or choosing to keep one old and one new tractor, even for the purpose of renting, which is cumulatively driving tractor demand.
Currently, the used tractor portfolio is about 30 per cent of the total tractor book. Around 4050 per cent of customers are buying used tractors, whereas in terms of value, it is about onethird given as the value of preowned vehicles is around 60 per cent of new tractors.
Kotak Bank started refinancing preowned tractors around 10 years ago and was one of the initial banks to venture into this segment. While there is no formal industry data source available for used tractors, assuming it to be half of the new tractor industry, Kotak Bank has an estimated market share of 1020 per cent.
“There is a huge market for second hand. We also offer topup loans to our existing customers, which helps them manage urgent financial needs,” Jadhav said, adding that in FY23, Kotak’s tractor book grew 16 per cent even as the industry degrew 78 per cent.
CROP LOANS
“This year also, we are looking to grow our portfolio. We are also launching and pushing crop loans. We already do it, but we are coming out with a proposition that is more convenient for today’s farmers and have built some product variants on the KCC loan offering,” he said.
Beyond tractor loans, Kotak Bank also offers term loans for infrastructure investment, KCC loans for working capital, and implement loans to allied workforce such as loaders, harvesters, sprayers, or farm equipment under the agriculture portfolio. The average ticket size for tractor loans is around ₹5 lakh, whereas for crop loans it is ₹78 lakh.