The Union Budget 2023 has recently announced a significant allocation of Rs 2,516 crore for the digitization of 63,000 Primary Agricultural Credit Societies (PACS) in the coming five years. The intended purpose of such digitization is to create greater transparency and accountability in PACS’s operations, enabling them to diversify their activities and serve as a central point for various services.
What is Primary Agricultural Credit Societies (PACS)?
PACS are village-level cooperative credit societies functioning as the last tier in a three-tier cooperative credit structure that reaches down from the State Cooperative Banks (SCB). SCBs transfer credit to District Central Cooperative Banks (DCCBs), which operate at the district level and interact with PACS that deal directly with farmers. PACS provides short-term and medium-term agricultural loans, with the first PACS forming in 1904. As of December 27, 2022, the Reserve Bank of India reported 1.02 lakh PACS, with only 47,297 being profitable as of March 2021.
Significance of PACS
PACS play a vital role in achieving financial inclusion in rural areas, providing basic banking services to farmers who may not have access to formal banking structures. They are typically located in rural areas, which makes it easier for farmers to access their services. PACS promote a culture of savings and enforce credit discipline, crucial for reducing default risks in the rural financial sector.
Challenges and Issues with PACS
Despite their essential role, PACS face several significant challenges. For instance, their coverage is inadequate; though active PACS cover about 90% of villages, coverage in some parts of the country, particularly in the northeast, is very low. Moreover, the resources of PACS are insufficient against the short and medium-term credit needs of the rural economy. PACS also struggle with significant over-dues and nonperforming assets, with the RBI report noting that PACS had reported lending worth Rs 1,43,044 crore and NPAs of Rs 72,550 crore.
The Way Forward
Despite these challenges, PACS continue to have the potential to be central to the vision of Atmanirbhar Bharat and Vocal for Local of the Indian Government. However, to fulfil this potential, PACS must be made more efficient, financially sustainable, and accessible. Strengthening the regulatory framework can ensure that PACS are well governed and can effectively serve farmers’ needs.
Direct Benefit Transfer (DBT), Interest Subvention Scheme (ISS), Crop Insurance Scheme (PMFBY), and Atmanirbhar Bharat
By providing various direct services like Direct Benefit Transfer (DBT), Interest Subvention Scheme (ISS), and Crop Insurance Scheme (PMFBY), digitization of PACs forms a crucial part of the Atmanirbhar Bharat initiative. The aim is to enable PACS to become nodal centres for these services as well as for essential agricultural inputs like fertilizers and seeds.
In summary, while there are challenges to overcome, the digitization of PACS and their potential role in DBT, ISS, PMFBY, and Atmanirbhar Bharat provides an opportunity to significantly enhance the financial support available to India’s farmers.
