Agricultural loans pose major asset-quality risk for Indian banks with 5.1% NPA ratio in Q2 2026

Agricultural loans in India are currently facing significant asset-quality risks, with bad-loan ratios surpassing other sectors. The gross non-performing asset ratio for agricultural loans is at 5.1%, compared to 1.5% for industry and services. Factors such as a poor monsoon have contributed to this situation, although agricultural bad loans have declined since 2020-21. Various banks have reported increased agricultural loan slippages but maintain a cautious outlook on borrower stress.