Primary Agricultural Credit Societies

Primary Agricultural Credit Societies (PACS) are village level cooperative credit societies that provide short- and medium-term finance to farmers for various agricultural and farming activities. Since the early 20th century, these societies have been playing an important role in strengthening the cooperative movement in India. PACS are regulated by State governments under Cooperative Societies Act. They are important as they provide easy credit, agricultural inputs to farmers and help in achieving the goal of financial inclusion. However, they face certain issues of inadequate resources, payment defaults and lack of digitalization. Government has taken steps to improve their functioning such as Computerization of PACS, widening their functions, convergence with other schemes among others.

Primary Agricultural Credit Societies have formed the basis of India's cooperative movement. The first Primary Agricultural Credit Society was established in 1904. Since that time, PACS have been significant in helping farmers access short- and medium-term finance. Until the 1970s, such societies remained the sole institution-based credit agency accessible to rural residents. In July 2021, the Ministry of Cooperation was created to facilitate cooperative societies.

Primary Agricultural Credit Societies (PACS) represent the grassroot level arms of the short-term cooperative structure and they deal directly with rural agricultural borrowers at village level. They serve as the link between ultimate borrowers on one hand and financing agencies at higher levels such as Scheduled Commercial Banks and NABARD on the other hand. As per NABARD's annual report of 2021-22, around 60% of beneficiaries of PACS are small and marginal farmers. PACS encourage various income generating activities through supply of requisite inputs and services.

• General Body: It exercises the control over board and the management as well.
• Management Committee: It is elected by the general body to perform the work specified under Society's rules, acts and by-laws.
• Chairman, Vice-Chairman and Secretary. They work for the benefit of members by performing their roles.

• Dual Regulation: PACS are regulated by the State government and the RBI
• They are registered under the Co-operative Societies Act and governed by the Banking Regulation Act 1949 and Banking Laws (Cooperative Societies) Act 1965.
• NABARD is the nodal refinancing agency for PACS.

• Financial Inclusion: By providing access to formal financial services in rural areas and encouraging savings culture among farmers.
• Credit Access: PACS extend credit to small and marginal farmers with minimum paperwork and ease. E.g. Kisan Credit Card scheme is facilitated through PACS for simplified credit card access to short-term credit.
• Providing Agricultural Inputs: PACS helps farmers by supplying agricultural inputs such as seeds, fertilizers, insecticides, etc.
• Marketing of Agricultural Produce: PACS helps farmers in marketing of their agricultural produce and thus improving farmers' income. E.g. In Kerala, PACS play an active role in marketing of cash crops such as spices and rubber.
• Training and Capacity Building: PACS organize various training programs and workshops for enhancing financial literacy and farmer awareness. E.g. In Maharashtra, PACS conducted training programs on organic farming and modern agricultural practices.

• Inadequate Coverage: The coverage of PACS is still low in some areas, especially in regions of north-east. Also, only about 50% of rural households are covered as members of PACS.
• Rising NPAs and Overdue: As per a report by RBI, PACS had lending worth Rs. 1,43,044 crore and NPAs of Rs. 72,550 crores.
• Lack of resources: PACS fall short of resources for the short- and medium-term credit needs of rural agricultural economy.
• Restricted Credit: The credit provided by PACS is confined mainly to crop finance (seasonal agricultural operations) and medium-term loans for identifiable purposes such as installation of pumps, digging of wells, etc.
• Lack of digitization: Many of the PACS are still not computerized and function manually which results in inefficiency and trust deficit.
• Other issues: Vested interests and group politics in societies, diversion of loans for other purposes.

• Computerization of PACS: Project for computerization of 63,000 functional PACS have been taken up to bring them onto a common national software, linking them with NABARD through State and District Cooperative Banks.
• Model Byelaws for PACS: These byelaws enable PACS to undertake more than 25 business activities to improve governance, transparency and accountability in their operations. These Byelaws have been adopted by 31 states/UTs so far.
• Widening the functioning of PACS: Government has proposed to set up new-multipurpose PACS covering every Panchayat/village in the next few years. The new domain will include dairy, setting up of godowns, Green Energy distribution, banking correspondents, etc.
• PACS as Common Service Centers (CSCs): Ministry of Cooperation signed MoU with MeitY, CSC e-Governance Service India Limited for providing more than 300 e-services such as banking, insurance, Aadhar enrolment/ updation, PAN card etc.
• PACS as Pradhan Mantri Kisan Samriddhi Kendra (PMKSK): Government is promoting PACS to operate as PMKSK for ensuring easy accessibility of fertilizers and related services.
• Convergence of PM-KUSUM at PACS level: Those farmers associated with PACS are eligible to adopt solar agricultural water pumps and install photovoltaic modules in their farms.
• Formation of New National Cooperative Policy: For enabling a vibrant ecosystem to transform the cooperative sector into multipurpose, multidimensional and transparent entities.

To realize the vision of "Sahkar se Samriddhi" (Prosperity through Cooperation), Primary Agricultural Credit Societies need to be made more efficient, financially sustainable and accessible to farmers. Government has taken undertaken several initiatives to strengthen & deepen the cooperative movement from Primary to Apex level Cooperatives in the country. All these initiatives will aim to improve the overall state of agriculture, uplift rural communities and promote inclusive economic growth. There is need for continuous efforts to enhance the viability of PACS and contribute to sustainable rural and agricultural development.