After getting adversely effected by the increasing amount of bad debts, the country's largest public sector lender, State Bank of India, is planning to abandon its centralized rural loans processing system and appoint local managers, who would be more aware of customer's needs and wants as compared to executives working in far flung offices.

The decision will affect small sized loans with amounts less than Rs. 3 lakh, disbursed in semi- urban and rural regions. Loans disbursed in these regions are increasingly becoming a good source of revenue. It is reported that SBI will shut down all its 326 points of centralized loan disbursals by March, 2013. This step will also help it to reduce its bad debts in rural regions.

Farm loans account for around 14 percent of SBI's total loans. The power to approve and sanction a loan application lies with branch managers in its branches in rural and semi-urban regions. The amount of loan that can be sanctioned by a branch manger depends upon the seniority of the manager. On the other hand, SBI disburses loans in metros through its retail loan hubs in these centers.