Primary Agricultural Credit Societies

As the name suggests, Primary Agricultural Credit Societies (PACS) are the fundamental tier of cooperative credit institutions in India. At the structural level, it can be traced under the head of Rural Co-operative Credit Institutions dealing in short-term credit provisional activities. Hence it is in a way the smallest of cooperative credit institutions and operates at the level of Gram 

Sabha and Panchayats. PACS assists in provision of the short-term and medium-term credit along with inputs such as seeds, pesticides etc. 

The structure of cooperative credit facilities is headed by the State Cooperative Banks at the level of the state. The District Central Cooperative Banks(DCCBs) come next in line and get the credit from the State Cooperative Banks. The DCCBs operate in tandem with the PACS to fulfil the objectives of facilitating credit at the grassroots level. The 1st PACS came into being in 1904. In the whole chain, PACS has direct dealings with the farmers. 

As per the RBI report released in 2022, there were around 1.02 lakhs PACS in India. The Union Budget 2023-24 noted the purpose behind the creation of a new Ministry Of Cooperation is to realize the vision of ‘Sahakar se Samriddhi’. The budget showcased that the government has begun the computerization of 63000 PACS with an investment of Rs. 2516 crore. It is done to further the aim of Sahakar Se Samridhi only. The budget also stressed on creation of model bye-laws for PACS to make them multi-purpose in talks with all the stakeholders. 

PACS are registered under the Cooperative Societies Act and hence come under the regulatory sphere of the State Government and also the Reserve Bank of India. The PACS gets refinancing from the National Bank for Agricultural and Rural Development (NABARD). They have a vital function in ensuring the financial inclusion of the marginalized rural population. As per a report, nearly 41% of all Kisan Credit Cards loans are provided by the PACS. The National Dairy Development Board (NDDB) and National Fisheries Development Board (NFDB) are also parties to the efficient working of PACS. 

The major Objectives of Primary Agricultural Credit Societies are as follows 

  1. To collate capital to fulfil the necessities of members. 
  2. Gather Deposits from the members 
  3. In addition to credit, PACS helps in the provision of inputs such as seeds, and fertilizers among others as well to the members. 
  4. They also have storage facilities with them. 

The sources of raising capital by PACS vary from deposits, borrowings and own funds to several other sources. 

The PACS can be formed by a group of 10 or more persons in a village. On the other hand, it is possible that people from several villages can also join hands to form PACS. The membership fees are kept very meager to let as many poor farmers come and join it. The members have

unlimited liability I.e. every year has full obligation in the event of loss of PACS. It also has an elected body to supervise the activities of PACS. 

Importance of the presence of PACS in India 

  1. Credit support- The establishment of PACS has significantly enabled farmers to access easy credit and thereby utilize it in enhancing the productivity of their farmlands. 2. The objective of financial inclusion is achieved with the setting up of PACS. The often neglected sections get the requisite credit. This further uplifted the agricultural system in India. 
  2. Accessibility of services near their residences has always been an issue. With PACS, this issue has been resolved. Along with that, the credit facilities guaranteed by PACS are not complex and long drawn. 
  3. Encouragement of Savings in the agrarian economy as the aim of policymakers is taken care of by the PACS. 
  4. The probability of default is substantially diminished due to the discipline put in effect by the PACS. 

Impediments or challenges confronted by PACS are as under- 

  • Technological impairments – PACS have not been able to adjust to the changing paradigm towards digitization. 
  • Their percentage in total credit allotment has decreased since the time of independence. It is at an all-time low of one-third as of now. 
  • Their reliance on refinancing agencies has been a cause of concern of late. The problem of resource crunch is there as the demands that need to be met by them are high. ● Of late, the issue of NPAs has also surfaced due to dues. 
  • They are facing stiff competition from the Farmer Producer Organisations(FPOs) that have mostly similar activities like inputs supply etc. 
  • Their functioning is affected by political interference, non-compliance with rules, and diminishing governing standards. 
  • The lack of member registration and lack of training of staff in tune with present needs is adding misery. 
  • An audit mechanism that is fair and efficient is missing. The democratic essences are at stake too. 
  • The know-how of PACS is still not much in the remote villages. 
  • There is an unbalanced growth of the same in regions around the landscape of India. For example, there is a lack of the same in northeastern states in comparison to other states. Furthermore, only fifty percent of the rural population is covered. 

Initiatives taken by the Government to promote PACS 

  1. National Cooperative Development Cooperation (NCDC) assists in planning for the evolution of agricultural produce. 
  2. Computerization of PACS to usher in transparency and accountability.
  3. The Union Budget 2023-24 has called for Model By-Laws for PACS. 4. The services provided by Common Service Centres (CSCs) can be handled by the PACS. 
  4. Large Area Multipurpose Cooperative Societies (LAMPS) is a Central Sponsored scheme for the computerization of functional PACS. The idea is to further give hand-holding support to the PACS. 

As per a reply by the honorable Minister of Cooperation, Maharashtra has the most functional PACS I.e. 20,788. The functional PACS means those that are audited as on 31st March 2022. 

The road ahead for PACS 

The need is to facilitate resource mobilization from the rural sections and members to promote the savings in rural net. The PACS can also seek diversification of activities by delivering non-credit facilities along with credit ones. It will provide the chance for the evolution of Multi-Service Centres. The Agriculture Infrastructure Fund(AIF) can be employed to do the same. 

  • Regular elections of the post holders and appointing decision-makers based on competence is another way of ensuring democratic ethos. 
  • Further, conducting timely audits and digitization will lead to a more transparent functioning for the system as a whole. 
  • It is also crucial to build better infrastructure to process effective channelization

    primary agricultural credit societies in india

    primary agricultural credit societies in india

    of the credit to the rural areas with the least effort. 

  • At last, the capacity building of employees is pressed for to I’m sure better coordination of activities. 
  • Enabling higher credit capabilities and restructuring PACS will usher in a paradigm shift in the agricultural landscape of India at the grassroots level.

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