Mumbai, Oct. 26 -- Non-banking financial companies (NBFCs) are turning cautious on rural lending as deficient monsoon rainfall and El Nino-related drought risks threaten farm incomes, consumption and borrowers' repayment capacity, prompting lenders to tighten monitoring and moderate disbursements in vulnerable regions.

Shriram Finance, Mahindra Finance, L&T Finance and HDB Financial Services have flagged geographically-concentrated risks in their September-quarter earnings calls, particularly in drought-affected parts of western and southern India. While the companies have not reported a broad-based deterioration in rural credit quality, their commentary points to a more selective approach to lending as the effects of weak rainfall feed ...