Primary Agricultural Credit Societies (PACS)


    In Context

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


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

    What are PACS?

    • About:
      • 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. 
    • Financial Structure:
      • The primary credit societies’ working capital is derived from their own funds, deposits, borrowings, and other sources.
        • Deposits are made by both members and non-members.
        • Borrowings are primarily made from central cooperative banks.
      • Credit from the SCBs is transferred to the district central cooperative banks, or DCCBs, that operate at the district level. 
      • The DCCBs work with PACS, which deal directly with farmers.
      • 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 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 only.
    • Organisational Structure:
      • Since 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.
      • A village can have multiple PACS.

    Significance of PACS

    • It 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 necessary at the start of their agricultural activities.
    • PACS have the capacity to extend credit with minimal paperwork within a short time.
    • PACS typically offer the following services to their members:
      • Input facilities in the form of a monetary or in-kind component
      • Agriculture implements for hire
      • Storage space

    Where is computerisation needed?

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