The India Meteorological Department (IMD) has forecast the 2026 southwest monsoon at 90 per cent of the long-period average (LPA), indicating below-normal rainfall. According to reports from Banking - Business Standard, this forecast has emerged as a key concern for non-banking financial companies (NBFCs) operating in rural and agricultural segments. The primary worry extends beyond rainfall itself to its impact on agricultural output, rural incomes, and repayment capacity across vulnerable segments. The monsoon's performance through Q2 could determine whether the strong growth seen in the first quarter can be sustained without a corresponding increase in credit costs. For NBFCs, the key question over the next two quarters will be whether the rainfall deficit translates into weaker rural incomes and higher delinquencies.
Mahindra & Mahindra Financial Services (Mahindra Finance) has stepped up monitoring and underwriting in segments more exposed to rural and agricultural income. As reported by Banking - Business Standard, Raul Rebello, MD & CEO, emphasized that the company was assessing El Nino risk through its impact on rural cash flows rather than rainfall alone. The company has implemented a high-sensitivity monitoring mechanism across geographies, with stress thresholds triggering additional collection measures for the existing loan book. For incremental business, Mahindra Finance has raised entry barriers and sought greater borrower contributions from vulnerable segments, including some small and medium enterprise (SME) and mobility customers.
Shriram Finance Executive Vice-Chairman Umesh Revankar indicated the company would wait another quarter before taking a firmer view on its full-year growth outlook, citing uncertainty over the impact of the monsoon deficit on rural incomes and agricultural output. According to Banking - Business Standard, Revankar stated the company was confident of growing more than 15% at least for the next quarter, with potential for faster growth if conditions improve. He noted that the impact of El Nino on agricultural output would become clearer after the second quarter.
For NBFCs, the key question over the next two quarters will be whether the rainfall deficit translates into weaker rural incomes and higher delinquencies. According to Banking - Business Standard, while managements are not yet forecasting a broad-based deterioration in asset quality, they are preparing portfolios for a range of outcomes. The impact will be particularly important for tractor and CV financing, where repayment capacity is closely linked to farm income, freight activity and the broader rural economy. The monsoon's performance through Q2 could determine whether the strong growth seen in the first quarter can be sustained without a corresponding increase in credit costs.
Global sugar production is forecast lower by 1.2 million tonnes to 184.9 million in the 2026-27 season starting October, with the US Department of Agriculture projecting opening global stocks at 43.5 mt, up 3.0 per cent year-on-year. BMI expects Indian sugar production to reach 33.0 mt in the 2026/27 season, up 10.0 per cent year-on-year, though risks are weighted to the downside, the principal concern being a strengthening El Nino. The global production surplus is expected to narrow to 2.8 mt in 2026-27 from 7 mt in 2025-26, with BMI noting that relatively small downward revisions could tip the market into deficit. However, analysts caution against viewing the global sugar market as 'tight' despite tighter market balance projections.
