New Delhi, Sept. 30 -- Maharashtra and Karnataka have declared drought in about three-fourths of their respective talukas (tehsils) for the 2026 kharif crop season. More states could follow suit. This could prompt the central or state governments to announce farm loan waiver schemes, weighing on investor sentiment.

As PSU (public sector undertaking) banks have greater exposure to agricultural loans than their private-sector counterparts, they are likely to be more affected by loan waivers. For instance, in FY26, the agriculture sector accounted for 10% of State Bank of India's (SBI) domestic loan book, compared to around 4% for the country's largest private-sector lender HDFC Bank (excluding agriculture-related trading activities). A sim...