Monsoon Deficit Threatens Farm Cash Flows
Banking sector officials have raised concerns regarding the renewal of Kisan Credit Cards (KCC) following a deficient southwest monsoon. The season concluded with rainfall 12.6 percent below the long-period average, posing a direct threat to agricultural cash flows and borrower repayment capacity. The situation is particularly acute in key agricultural states, with Karnataka recording a 35 percent rainfall deficit and Maharashtra experiencing a 19 percent shortfall during the June-September period.
While banks report no broad-based stress in asset quality at this stage, lenders are closely monitoring the situation. A senior banking executive noted that field officers are actively engaging with farmers in affected areas to evaluate the impact on their ability to service dues, especially as KCC loans come up for repayment and renewal. "Normally, a KCC loan is given for three years. If the situation persists, renewals may become an issue going forward," a state-owned bank official stated.
Scale of KCC Exposure
The potential impact is significant given the scale of the KCC portfolio. According to the Reserve Bank of India’s Trends and Progress Report, 2025, there were 7.74 crore operative KCCs across banks, with outstanding loans totaling approximately Rs 10.20 lakh crore. This represents a roughly 4 percent increase in outstanding credit from the previous year’s Rs 9.81 lakh crore, while the number of operative cards remained largely stable at 7.72 crore in 2024.
In Karnataka, which has declared 217 of its 240 taluks as drought-affected, the outstanding KCC book rose by 7.7 percent to Rs 67,625 crore. Similarly, in Maharashtra, where 265 of 358 talukas have been declared drought-affected, outstanding KCC loans increased by 9 percent to Rs 85,049 crore, despite a slight decline in the number of operative cards. This divergence suggests an increase in average exposure per card, which could strain repayment capacity if farm incomes remain under pressure.
Bank-Specific Agriculture Portfolios
Public Sector Banks (PSUs) and major private lenders hold substantial agriculture exposures, making them vulnerable to regional crop failures.
* **State Bank of India (SBI):** Agriculture advances stood at Rs 4.37 lakh crore as of June 30, up 25.43 percent year-on-year. The agriculture gross NPA ratio was 7.03 percent. * **Bank of Maharashtra:** Agriculture advances reached Rs 42,290 crore, up 28.94 percent. The agriculture-sector gross NPA ratio improved to 7.58 percent from 9.65 percent a year earlier. * **Canara Bank:** Agriculture and allied advances were approximately Rs 2.76 lakh crore. The sector’s gross NPA ratio stood at 2.06 percent. * **HDFC Bank:** Agriculture accounts for 17 percent of its retail assets, translating to roughly Rs 1.24 lakh crore in exposure. The overall GNPA was 1.17 percent, dropping to 0.91 percent when excluding agriculture. * **Axis Bank:** The rural loans portfolio stood at Rs 1.17 lakh crore, with farmer finance constituting 35 percent, or approximately Rs 41,000 crore. Retail agriculture disbursements grew 16 percent year-on-year in Q1FY27.
Relief Measures and Future Outlook
In response to the drought, the Karnataka State Level Bankers’ Committee has discussed relief measures, including a 12-month moratorium on KCC and allied-sector loans in affected areas. However, banking officials note that formal guidelines are yet to be finalized, leaving uncertainty over whether the relief will involve waivers or other forms of support.
For lenders, the immediate concern is not a systemic deterioration in asset quality but the potential for sustained pressure on farmers’ cash flows. If weak rainfall and crop-related stress persist, KCC repayments and renewals could become a more significant issue in affected regions in the coming quarters.