★ A weak monsoon, slow rainfall progress, and the possibility of delayed kharif sowing due to El Niño have raised concerns about the health of banks’ agricultural loan portfolios. Gross non-performing assets (GNPAs) in the agriculture sector had already reached nearly ₹1 lakh crore in the previous fiscal year, and experts warn that prolonged rainfall deficits could lead to higher loan defaults in the second half of FY27.

★ According to Crisil Intelligence, rain-fed regions and small farmers are likely to be the most affected, as their incomes are heavily dependent on crop production. Any stress in agricultural loan books is expected to become more visible after the kharif harvest.

★ However, some experts believe the situation may be better than during previous El Niño years due to improved irrigation coverage, wider crop insurance penetration, and more diversified rural income sources. Higher reservoir levels and increased adoption of short-duration crops could also help mitigate risks.

★ According to the India Meteorological Department (IMD), rainfall across the country was 46% below normal as of June 22. The Agriculture Ministry has warned that El Niño could have a relatively severe impact on 12 states during the kharif season, raising concerns over agricultural output, rural incomes, and the asset quality of the banking sector.