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NBFCs tighten lending in drought-hit districts as rural stress threatens growth

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NBFCs tighten lending in drought-hit districts as rural stress threatens growth

Although headline asset quality across the sector remained stable in the September quarter, rising net slippages, Stage-2 assets and early-bucket delinquencies at select lenders indicate potential stress in rural and agriculture-linked portfolios.

Several NBFCs have tightened underwriting and calibrated disbursements in drought-hit districts across Maharashtra, Karnataka and Telangana amid emerging rural repayment stress.

Vehicle financiers face rising credit costs, which increased to 2% in Q2FY27 from 1.8% in Q1, while early delinquencies have increased at Shriram Finance.

NBFC-MFIs reported improving gross Stage-3 assets at 2.3%, but credit costs rose to 3.7% from 3.2%, with drought-related stress emerging at CreditAccess Grameen.

Despite rural stress, NBFCs reported 21% AUM growth and 40% profit growth in Q2FY27. Higher funding costs and proposed insurance commission changes pose additional profitability risks.

Several non-banking financial companies ( NBFCs ) have tightened underwriting and calibrated loan disbursements in districts facing drought-like conditions in Maharashtra, Karnataka and Telangana, as emerging repayment stress threatens to weigh on rural and agricultural loan portfolios. Vehicle financiers and microfinance lenders are particularly exposed, with early signs of rising delinquencies prompting concerns over credit costs and loan growth in the second half of FY27. Although headline asset quality across the sector remained stable in the September quarter, rising net slippages, Stage-2 assets and early-bucket delinquencies at select lenders indicate potential stress in rural and agriculture-linked portfolios. The concerns are particularly pronounced in farm equipment, construction equipment and commercial vehicle financing, as well as microfinance lending in drought-affected areas, according to JM Financial. Advt



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