What are Primary Agricultural Credit Societies?

Source: The post is based on the article “What are Primary Agricultural Credit Societies?” published in Indian Express on 9th February 2023.

What is the News?

The Union Budget has announced Rs 2,516 crore for computerisation of Primary Agricultural Credit Societies(PACS) over the next five years.

What are Primary Agricultural Credit Societies(PACS)?

PACS are village-level cooperative credit societies that serve as the last link in a three-tier cooperative credit structure headed by the State Cooperative Banks (SCB) at the state level. 

Credit from the SCBs is transferred to the district cooperative central banks, or DCCBs, that operate at the district level. The DCCBs work with PACS, which deal directly with farmers.

Since these are cooperative bodies, individual farmers are members of the PACS and office-bearers are elected from within them. A village can have multiple PACS.

​​A report published by the Reserve Bank of India in 2022 put the number of PACS at 1.02 lakh.

What is the lending mechanism of PACS?

PACS are involved in short-term lending — or what is known as crop loan. At the start of the cropping cycle, farmers avail credit to finance their requirement of seeds, fertilizers etc. 

Banks extend this credit at 7% interest, of which 3% is subsidized by the Centre and 2% by the state government. Effectively, farmers avail the crop loans at 2% interest only.

Why are PACS attractive?

The attraction of the PACS lies in the last-mile connectivity they offer. For farmers, timely access to capital is necessary at the start of their agricultural activities.PACS have the capacity to extend credit with minimal paperwork within a short time.

What are the challenges related to PACS?

Since PACS are cooperative bodies, political compulsions often trump financial discipline and the recovery of loans is hit. Chairpersons of PACS participate in electing the office-bearers of DCCBs. Political affiliations are important here as well.

Why are PACs computerized?

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