Mumbai: Shares in state-run banks fell on concerns that a looming drought would increase defaults of farm loans, leading to higher provisioning in coming quarters.
Top-ranked State Bank of India fell 1 per cent, while Oriental Bank of Commerce dropped 2.2 per cent and Allahabad Bank retreated 1.5 per cent.
"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," Ostwal added.
Copyright Thomson Reuters 2012
Top-ranked State Bank of India fell 1 per cent, while Oriental Bank of Commerce dropped 2.2 per cent and Allahabad Bank retreated 1.5 per cent.
"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," Ostwal added.
Copyright Thomson Reuters 2012
