New Delhi: Shares in state-run banks fall on concerns a looming drought would increase defaults of farm loans, leading to higher provisioning in coming quarters.

Top-ranked State Bank of India falls 1 percent, while Oriental Bank of Commerce drops 2.2 percent and Allahabad Bank retreats 1.5 percent.

"If government declares drought in most of the states, then there will be rescheduling of repayment of crop loans, which accounts for a significant portion of total agri portfolio of the state-run banks," Manish Ostwal, sector analyst at KR Choksey said.

"Also, non-banking financial firms such as Mahindra & Mahindra Finance and Sundaram Finance, who provide loans to purchase agri equipments, vehicles will also see pressure on their asset quality," adds Ostwal.


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