June 29: Agricultural loan demand could face short-term pressure due to the impact of El Niño conditions, although overall credit growth is expected to remain healthy, according to a recent report.
The report noted that climatic variability linked to El Niño may affect crop output in certain regions, potentially influencing farmers’ borrowing requirements and repayment cycles. However, strong rural demand, government support measures, and diversified lending portfolios are expected to help cushion the impact on the broader banking sector.
Despite potential stress in the agriculture segment, the report highlighted that credit growth across sectors is likely to remain steady, supported by improving economic activity, rising consumption, and sustained corporate borrowing demand.
Banks are expected to maintain a balanced lending approach, with continued focus on retail, housing, and MSME segments, which are likely to support overall credit expansion. Financial institutions are also strengthening risk management practices to navigate possible sectoral fluctuations.
Analysts said that while weather-related risks remain a key variable for agriculture, the banking sector’s diversified exposure and structural growth drivers are expected to ensure stability in credit performance in the coming months.
