India's largest public sector lender State Bank of India [Get Quote] has put on hold the financing of new tractors and other capital equipment, a move that can have an impact on agriculture sector, a priority area for the government.

SBI has issued a circular to all its branches, saying that the "bank has put on hold financing new tractor and farm mechanisation activities, which include power tiller and combine harvester, with immediate effect in view of very high overdues in this sub-segment of agri advances."

This comes within months of Finance Minister P Chidambaram announcing a whopping Rs 60,000-crore (Rs 600 billion) debt waiver and debt relief scheme for distressed farmers.

Sources said that in the tractor segment, SBI has been facing a very high rate of non-payment from farmers and this was the main reason to stop financing temporarily.

"The decision will be reviewed based on the progress achieved in reduction of overdues, in due course," the circular from the agri business unit -- product development and management department of SBI said.

While presenting the Budget for 2008-09, Chidambaram had offered Rs 60,000-crore debt package comprising waiving all loans overdue as on December 2007 for small and marginal farmers owning less than two hectares of land and one time settlement for large farmers.

The SBI scrip has come down to Rs 1,704 in the stock market from a high of Rs 2,540 on January 14 this year.