In order to provide cheaper credit to farmers for buying tractors and equipment, State Bank of India has tied up with Mahindra & Mahindra to offer a concessional interest rate of 11 per cent with one year's gestation period for the purchase of M&M's tractors.

The "SBI-M&M Tractor Plus Scheme" envisages financial solutions for farmers desirous of buying M&M tractors and other farm implements, SBI said in a release in Mumbai on Wednesday, after signing the memorandum with M&M.

The country's largest commercial bank has designed the scheme keeping in mind Finance Minister Jaswant Singh's recent announcement on affordable and special farm loans.

As per the MoU, SBI would now become the preferred financier for M&M tractors in Madhya Pradesh, Chattisgarh, Orissa, West Bengal, Maharashtra, Bihar, Jharkhand and the North Eastern states.

SBI has reduced the margin requirements from 15-20 per cent to 10 per cent and offered a concessional interest rate of 11 per cent. The tenure of the loan would be of 7-9 years with one year's gestation period, subject to the bank's credit norms, the release said.

SBI's deputy managing director C Bhattacharya said the tie up was aimed at boosting the economic activity in rural areas by creating demand through cheaper credit for the farmers. The collaboration with M&M would be expanded to include other rural financial products, one of them especially targeting ex-servicemen, he added.

M&M enjoys a 27 per cent market share for tractors in the country.