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Bank of Maharashtra sees limited drought impact as gold-backed farm loans cushion stress

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Bank of Maharashtra sees limited drought impact as gold-backed farm loans cushion stress

Bank of Maharashtra sees limited drought impact as gold-backed farm loans cushion stress

Gold-backed agricultural loans account for Rs 18,600 crore of Bank of Maharashtra’s Rs 44,000 crore agricultural loan book, while almost the entire year-on-year increase in agricultural advances was driven by gold-backed lending.

Management expects drought restructuring to have a manageable impact, with 10-15% of borrowers likely to opt for restructuring based on past trends.

Gross NPA improved to 6% from 10% a year earlier, while Q2 slippages eased to Rs 870 crore, aided by crop recoveries.

Global advances grew around 30% year on year, and the bank retained its 18% credit growth guidance.

The brokerage raised FY27 and FY28 earnings estimates by 10% and 7%, respectively, while maintaining its Rs 100 target price; higher-than-expected agricultural stress remains a key risk.

Bank of Maharashtra expects limited pressure on asset quality from Maharashtra’s drought, citing the secured nature of a large part of its agricultural portfolio, limited pure crop loan exposure and improving recoveries. Almost the entire Rs 11,000 crore year-on-year increase in agricultural loans was driven by gold-backed lending, while pure crop loans account for about 2% of overall loans, in the brokerage’s assessment. The bank, which serves as the State Level Bankers’ Committee convenor for Maharashtra, said the restructuring scheme had been finalised. Management expects the impact to remain manageable, with historical trends suggesting that only 10-15% of borrowers opt for restructuring. The assessment is supported by the secured nature of the portfolio and the bank’s proactive approach, according to an ICICI Securities report.


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