This document discusses Primary Agricultural Credit Societies (PACS) in India. It begins by explaining that PACS operate at the village level and are the primary providers of short-term credit to farmers. It then defines PACS and discusses their organizational structure, capital sources, functions, and significance. The document notes that PACS play an important role in rural credit but also face issues like inadequate coverage, resources, and overdues. It concludes by suggesting ways for PACS to expand their services and strengthen rural economies, such as becoming multi-service centers.

1. P PRIMARY
A AGRICULTURE
C CO-OPERATIVE
S SOCIETY

2. INTRODUCTION:-
 The Rural co-operative credit system in India is primarily mandated to ensure flow of
credit to the agriculture sector.
 It comprises short-term and long-term co-operative credit structures.
 The short-term co-operative credit structure operates with a three-tier system –
 Primary Agricultural Credit Societies (PACS) at the village level,
 Central Cooperative Banks (CCBs) at the district level and
 State Cooperative Banks (StCBs) at the State level.
 PACS are outside the purview of the Banking Regulation Act, 1949 and hence not
regulated by the Reserve Bank of India.

3. Definition
 PACS are the ground-level cooperative credit institutions that provide short-term, and
medium-term agricultural loans to the farmers for the various agricultural and farming
activities.
 It works at the grassroots gram Panchayat and village level.
 The first Primary Agricultural Credit Society (PACS) was formed in the year 1904.
 The PACS functioning at the base of the co-operative banking system constitute the major retail
outlets of short term and medium term credit to the rural sector.
 It serves as the final link between the ultimate borrowers on the one hand and the higher
financing agencies, namely the Scheduled Commercial Banks, and the RBI/NABARD on the
other hand.

5. Organisational Structure of PACS:-
 General Body of PACS: Exercise the control over board as well as management.
 Management Committee: Elected by the general body to perform the work as prescribed by the society’s
rules, acts, and by-laws.
 Chairman, Vice-Chairman, and Secretary: Work for the benefit of the members by performing their roles
and duties as assigned to them.
 Office Staff: Responsible for performing day to day work.

6. Who can form PACS?
 A primary agricultural credit society can be formed by a group of ten or more people from a
village.
 The society’s management is overseen by an elected body.
 The membership fee is low enough that even the poorest agriculturist can join.
 Members of the society have unlimited liability, which means that each member assumes
full responsibility for the society’s entire loss in the event of its failure.

7. What capitalizes PACS?
 The primary credit societies’ working capital is derived from their own funds, deposits,
borrowings, and other sources.
 Share capital, membership fees, and reserve funds are all part of the company’s own funds.
 Deposits are made by both members and non-members.
 Borrowings are primarily made from central cooperative banks.

8. Functions and Significance of Primary Agriculture Credit Society
Functions of Primary Agriculture Credit Society:
 It promotes economic interest of members in accordance with the co-operative principle.
 It provides short term and medium term loans.
 It promotes savings habits among members.
 It supplies agricultural inputs like fertilizers, seeds, insecticides, and implements.
 It provides marketing facilities for the sale of agricultural products .

9. What is the Significance of PACS?
 They are multifunctional organizations that provide a variety of services such as
banking, on-site supplies, marketing produce, and consumer goods trading.
 They function as mini-banks to provide finance, as well as counters to provide
agricultural inputs and consumer goods.
 These societies also provide warehousing services to farmers in order to preserve and
store their food grains.
 PACS account for 41% (3.01 crore farmers) of the Kisan Credit Card (KCC) loans given
by all entities in the country, and 95% of these KCC loans (2.95 crore farmers) through
PACS are to small and marginal farmers.

10. cont
 For the uninitiated, a PACS is the first building block of the century-old cooperative
banking system of India.
 PACS can play a colossal role in bringing farmer communities closer to credit, inputs,
market and value addition.
 No commercial bank branch can ever come close to providing the kind of services a
Primary Agriculture Credit Society (PACS) can.
 PACS can also play a major role as financial supply chain of agro-commodities in the
upcoming Gramin Agriculture Markets (GrAMs) in the private sector.

11. Positive features:-
• Primary Agricultural credit society helps the farmers get credit for agricultural, short-
term, and medium-term purposes and government-related funds distribution to
eligible farmers.
• These credit societies also help implement government schemes related to farmers at
their level and observe whether these schemes are attaining the purpose or not.
• PACS acts as a link between the higher financial agencies of the country who can resolve
various issues of the members and the ultimate borrowers, there by helping resolve the
farmers’ problems.

12. What are the Issues with the PACS?
Inadequate Coverage:
 Though geographically active PACS cover about 90% of villages, there are parts of the
country, especially in the north-east, where this coverage is very low.
 Further, the rural population covered as members is only 50% of all the rural
households.

13. Inadequate Resources:
 The resources of the PACS are inadequate in relation to the short-and medium-
term credit needs of rural economy.
 The bulk of even these inadequate funds come from higher financing agencies and not
through owned funds of ‘societies or deposit mobilization by them.

14. Limited Credit:
 First, the PACS provide credit to only a small proportion of the total rural population.
 The credit given is confined mainly to crop finance (seasonal agricultural operations)
and medium-term loans for identifiable purposes such as the digging of wells,
installation of pump sets, etc.

15. Overdues:
 Large over-dues have become a big problem for the PACS.
 They curb the circulation of loanable funds, reduce the borrowing as well as lending
power of societies, and give them the bad image of the societies of defaulting debtors
are willful.
 Bigger landowners take undue advantage of their relatively stronger position in
villages in both appropriating cheaper cooperative credit and not paying back their loans
in time.

16. Other Linked Inputs, Extension Service, and Marketing
 The provision of adequate and timely credit is only one of the necessary conditions for
improving the productivity of farmers and others in villages.
 Additional facilities in the form of the supply of inputs (like better seeds, fertilizers,
pesticides, etc.) extension and marketing service must also be provided to small and
marginal farmers to enable them to make good use of the credit given to them.
 Already a step in this direction has been taken in the form of Farmers Service Societies
(FSS) for small and marginal farmers.
 But what is required is not the proliferation of new forms of societies, as of revitalizing
weaker societies into stronger units, most possibly by reorganizing them into larger-sized
multi-purpose co-operatives.

17. Way Ahead
 PACS need to be developed as a One Stop Shop for meeting all the needs of its member
 PACS have to look for new Business opportunities
 Provide much-needed forward and backward linkages.
 PACS as Multi Service Centers can help members to become self-reliant and promote
rural entrepreneurship - facilitating increased income
 PACS as Multi Service Centers – can financially strengthen the members Doubling of
income
 (The recent decision by NABARD to develop 35,000 PACS into MSCs in mission-mode
is a step in this direction.)

18.  PACS as MSC - Technology supported activities like Micro-ATMs and Wi-Fi Internet.
 Through Micro-ATMs, PACS members who stay far away from the PACS also can have
access to banking services
 Potential for expansion of business through convergence with other stakeholders like
Farmers Producer Organizations
 PACS can be provided direct exposure to best practices in various facets of agri-business
through partnerships with leading Agricultural Universities / Institutes.

19. Conclusion
These more than a century-old institutions deserve another policy push and can occupy a
prominent space in the vision of Atmanirbhar Bharat as well as Vocal for Local of the
Government of India, as they have the potential to be the building blocks of an Atmanirbhar
village economy.

20. References:-
www.rbi.org.in
www.nabard.org
Wikipedia
www.civilsdaily.com
www.scholar.google.co.in

21. THANK YOU