A below-normal monsoon and the risk of El Niño affecting rural cash flows could emerge as key risks for non-banking financial companies (NBFCs) such as Mahindra & Mahindra Financial Services (Mahindra Finance), Shriram Finance, HDB Financial Services and others, prompting lenders to step up portfolio monitoring and underwriting in vulnerable segments.
The India Meteorological Department (IMD) has forecast the 2026 southwest monsoon at 90 per cent of the long-period average, indicating below-normal rainfall. Though IMD continues to forecast below-normal rainfall for August and September amid El Niño conditions, the rainfall deficiency has narrowed from around 37 per cent in June to around 11 per cent now. The weather office has also warned that weak El Niño conditions in the Pacific could strengthen during the monsoon season.
For NBFCs, the concern is less about rainfall itself and more about its impact on agricultural output, rural incomes and repayment capacity. Tractor and commercial vehicle (CV) finance, as well as lending to small businesses, could face pressure if a prolonged rainfall deficit weakens rural cash flows.
business-standard