Reuters Market Eye - Shares in state-run banks fall on concerns a looming drought would increase defaults of farm loans, leading to higher provisioning in coming quarters.
Top-ranked State Bank of India
"If government declares drought in most of the states, then there will be rescheduling of repayment of crop loans, which accounts for a significant portion of total agri portfolio of the state-run banks," Manish Ostwal, sector analyst at KR Choksey said.
"Also, non-banking financial firms such as Mahindra & Mahindra Finance and Sundaram Finance, who provide loans to purchase agri equipments, vehicles will also see pressure on their asset quality," adds Ostwal.
