Farmers may have a reason to cheer as leading public sector banks in the industry are likely to announce cheaper loans for tractors.

The government wants to an extend an exclusive finance facility for tractors and therefore is in talks with Indian Banks' Association (IBA), the apex banking body, for introducing a separate segment for tractors.

"The government is in talks with all leading public sector banks to make sure loans are easily available. A formula can be worked out to lower the interest rate or a special scheme can be put into place," said a senior government official.

He further informed that the government has formed a special cell including officials from the ministry of heavy industries and IBA in order to examine the credit flow into this segment. An official from IBA also confirmed that such a proposal was under consideration.

Cheaper loans will be a blessing for tractor manufacturers that have been witnessing a drop in sales due to the slowdown. Besides, nine out of the every ten tractors that are purchased are financed by banks and with farmers denied credit this special scheme would help to revive the demand for tractors.

Tractor Manufacturers' Association president LD Mittal said, "We have been pushing for a special scheme for tractor loans as farmers are being denied credit. Apart from bringing down the interest rates, relaxing the borrowing norms is very important. If the norms are not relaxed, it would be difficult to give a boost to agriculture credit."

Meanwhile the bankers inform that the special rate of around 10% to 11% will be offered for the tractor loans as compared to 14% to 15% charged at the present.

Initially the facility is likely to be announced by the industry leaders such as State Bank of India (SBI) and Punjab National Bank (PNB).