The Cabinet Committee on Economic Affairs (CCEA) has green-lighted the digitisation of around 63,000 Primary Agricultural Credit Societies (PACS). The decision means that these PACS will get around Rs 4 lakhs each for upgrading their capacity and digitizing all their records. This landmark move is expected to not only enhance PACS’s transparency, reliability, and efficiency but also turn them into focal points for availing several services.
The Implementation Cost and Expected Benefits
The digitization of PACS is projected to cost Rs 2,516 crore. Despite the hefty cost, the benefits are substantial. It is expected to aid approximately 13 crore small and marginal farmers. Furthermore, it will create about 10 jobs per center, with plans of scaling up the number of PACS to 3 lakhs in half a decade.
PACS: A Primer
Established in 1904, PACS have the important role of providing short-term and medium-term agricultural loans to farmers. These grassroots cooperative credit institutions operate at the level of gram Panchayats and villages, forming major retail outlets for disbursing credit in the rural sector.
PACS’s Key Objectives
PACS aim to gather capital for making loans and supporting members’ essential activities. They encourage members to develop a savings habit by collecting deposits. Also, they arrange for supply and development of improved breeds of livestock. PACS also strive to make necessary arrangements for better irrigation on lands owned by their members, along with encouraging diverse income-generating activities through the supply of necessary inputs and services.
The Significance of PACS
PACS play an array of roles from serving as mini-banks to providing agricultural inputs and consumer goods. They also offer warehousing services to help farmers store their grains. PACS are responsible for 41% of the Kisan Credit Card loans, and a whopping 95% of these are given to small and marginal farmers.
Issues with PACS
Despite the significant role they play, PACS face issues such as inadequate coverage, insufficient resources, limited credit, and large overdues. Geographically, active PACS cover only around 90% of villages, leaving parts of the country, particularly in the north-east, underserved. Also, rural household membership is only around 50%. Another problem is that the resources of PACS don’t meet the short- and medium-term credit needs of the rural economy. Moreover, loan defaults have become a serious issue for PACS, affecting their lending power severely and giving them an unfavorable image.
The Future of PACS
As these institutions have the potential to be the building blocks of an Atmanirbhar village economy, another policy push is crucial. It will help improve the PACS’ resource mobilization capacity substantially if they are reorganized into strong and viable units. This way, they would be able to attract more deposits and more loans from higher financing agencies.
