Primary Agricultural Credit Societies (PACS)

Context- Recently, the Union Budget has announced Rs 2,516 crore for computerisation of 63,000 Primary Agricultural Credit Societies (PACS) in the next five years.

Key Highlights 

• Aim

• • The plan aims to bring greater transparency and accountability in the operations of PACS.
  • Also, in order to enable PACS to diversify their business and undertake more activities.

Primary Agricultural Credit Societies (PACS)

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

Financial Structure:

• The primary credit societies’ working capital is derived from their own funds, deposits, borrowings, and certain other sources.

• Deposits are made by both the members and non-members.

• Borrowings are made from central cooperative banks.

• Credit from the SCBs is transferred to the district central cooperative banks, or DCCBs, which operate at the district level. 

• The DCCBs work with PACS that deal directly with farmers.

• PACS are involved in short term lending or what is called a crop loan. 

• At the start of the cropping cycle, farmers avail credit to finance their requirement of seeds and fertilizers etc. 

• Banks extend the credit at 7 percent interest, of which 3 per cent is subsidized by the Centre, and 2 per cent by the state government. 

• Effectively, farmers avail the crop loans at 2 percent interest.

Organisational Structure:

• As these are cooperative bodies, individual farmers are members of the PACS, and office-bearers are elected from within them.

• The membership fee is low enough that even the poorest agriculturist can join it. 

• A village can have more than one PACS.

Significance of PACs

• PAC is a village-level institution that works directly with rural residents.
• PACS provides the last mile connectivity to the farmers as the timely access to capital is important at the start of their agricultural activities.
• PACS have the capacity to extend credit with minimal paperwork in a short time.
• These typically offer certain services to their members such as
  • Input facilities in the form of a monetary or in-kind component
  • Agriculture implements for hire
  • Storage space

Need for computerisation

• While SCBs and DCCBs are connected to the Core Banking Software (CBS), hence PACS are not, a compatible platform is necessary to bring about uniformity in the system.
• Computerisation of PACS has been taken up by a few states, including Maharashtra.

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