Primary Agricultural Credit Societies (PACS)
Primary Agricultural Credit Societies (PACS) is the foundation of India’s century-old cooperative banking system. Each PACS was intended to function as a village-level credit society where the farmers contributed share capital, made deposits, and loaned money to one another.
Nearly every aspect of a PACS’s structure, including elected members, one member, one vote, openness, accessibility at all levels, simplicity of operation, speed, and personal connection, contributes to a strong “public policy for credit.”
Primary agriculture cooperative credit societies are financial organizations that have a significant impact on the local level of community development. They are multifaceted businesses that offer a variety of services like banking, purchasing supplies, selling crops, and dealing with consumer products.
How do Primary Agricultural Credit Societies (PACS) Work?
- PACS work directly with rural or agricultural borrowers, disburse loans to them, and collect loan repayments. and take on marketing and distribution responsibilities. They are the foundation and take up a dominant position in the cooperative credit framework. It acts as the last link between the primary borrowers and the higher lending institutions, particularly the Scheduled Commercial Banks and the RBI/NABARD. Therefore, it is critical that primary agriculture co-operative credit societies work effectively.
- Since the year 1904, these organizations have been essential in helping farmers to get easy finances. The primary retail outlets for short and medium-term credit to the rural sector are the PACS, which form the backbone of the cooperative banking system.
- PACS provides improved seeds, pesticides, fertilizers, and tools. It offers marketing resources for the retail selling of agricultural goods. Additionally, it meets domestic product needs for things like sugar and kerosene.
- The prosperity of the rural economy depends on the Primary Agricultural Cooperative Credit Societies (PACS), which make up the bottom tier of the nation’s three-tier Short-Term Cooperative Credit (STCC) system and have over 13 crore farmers as members. 95% of the KCC loans made through PACS go to small and marginal farmers, making PACS responsible for 41% of all KCC loans made by organizations in the nation. The NABARD has already automated and implemented Common Banking Software (CBS) at the other two tiers, State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs).
Major Challenges For Primary Agricultural Credit Societies (PACS):
- The majority of PACS have not yet been automated and are still operated manually, which results in disorganization and a lack of trust. PACS has been partially and independently computerized in several states. They do not employ uniform software, and their connection to DCCBs and StCBs is not established. It has been suggested to computerize all PACS across the nation, integrate them onto a single system at the national scale, and use a Common Accounting System (CAS) for their daily operations.
- Due to a lack of funding from the banking industry, farmers confront numerous obstacles in their farming endeavors. The Primary Agricultural Credit Societies (PACS), the lowest tier institution in the cooperative sector, play a key role in this. These rural-based organisations have been instrumental in advancing agricultural activities as a means of achieving more equitable growth on a financial level. By providing loans from the deposit fund they create at a low rate of interest, they meet the needs of farming households.
- In addition to promoting financial intermediation and enhancing service delivery to farmers, particularly Small & Marginal Farmers (SMFs), the computerization of PACS will also serve as a pivotal service delivery point for a variety of services including the distribution of inputs like seeds and fertiliser. Aside from advancing digitalization in rural areas, the programme will help in expanding the reach of PACS as outlets for both banking and non-banking operations.
- The DCCBs can then sign up as one of the crucial alternatives for participating in a number of government programmes that can be carried out through PACS. It will guarantee quick loan repayment, cheaper transfer costs, quicker audits, and a decrease in accounting and payment inequalities with State Cooperative Banks and District Central Cooperative Banks.
The Way Forward:
PACS assists in meeting the financial needs of its members, so their work should not be suspended due to a lack of funding. It increases the credit criteria for farmers, assisting them in expanding their enterprise. A PACS must first transform from a credit society into a multi-service centre (MSC) and into a one-stop shop for both commodities and services in order to make a significant impact.
The RBI has been working with state governments to enhance PACS and address regional disparities in cooperative practice to make all Primary Agricultural Cooperative Societies economically sustainable and to provide a complete and effective flow of credit support to rural areas. By giving weak societies larger sums of money to write off their losses, and bad debts, these efforts are being stepped up.