Why Primary Agriculture Credit Society needs to be propped up Editorial 14th Aug’20 HindustanTimes

Why Primary Agriculture Credit Society needs to be propped up Editorial 14th Aug’20 HindustanTimes

Rural credit cooperatives:

  • Just about two decades ago, credit cooperatives covered 69% of the rural credit outlets and their share in rural credit was 45% of the total rural credit in the country.
  • They had a lion’s share of 57% in providing short-term credit for purchase of inputs.


  • A Primary Agricultural Credit Society (PACS) is the first building block of the century-old cooperative banking system of India.
  • Each PACS was designed to be a village-level credit society into which the farmers brought in share capital, deposits and provided loans to each other.
  • It has features like elected members, one- member-one-vote, transparency, ground-level reach, ease of operations, speed, human connect etc.

Decline of credit cooperatives:

  • Today, credit cooperatives have lost their significance, with their share in rural credit being just 12.26% in FY19.
  • This continued slide, and the ideas to get them back on track, are being researched within NABARD and RBI.

PACS have important role in agri-marketing reforms:

  • The recent amendments in agriculture marketing acts are an effort towards opening up the market for the Indian farmer.
  • These amendments reinforce the role PACS can play in bringing farmer communities closer to credit, inputs, market and value addition.

Agriculture Infrastructure Fund (AIF) launched:

  • The Indian Prime minister recently inaugurated the Rs 1 lakh crore Agriculture Infrastructure Fund (AIF).
  • The fund is aimed to provide a medium to long term debt financing facility for investment in viable projects for post-harvest management infrastructure and community farming assets through interest subvention and financial support.
  • Under the AIF scheme, banks and financial institutions will provide loans to Primary Agricultural Credit Societies (PACS), farmers, Marketing Cooperative Societies, FPOs, SHGs etc.

PACS have an important role in scheme’s success:

  • While inaugurating the AIF, the PM interacted with members of PACS.
  • PACS have an important role to play to bring the objectives behind the AIF closer to farmers.
  • The AIF, set up for establishing decentralised farm gate infrastructure, holds huge as India currently loses 15% of its food grains due to poor post-harvest management (PHM) facilities and lack of farm-gate storage.

To be effective, PACS must turn into multi-service centres (MSCs):

  • For the PACS to really make a difference, they will need to first transition from being just a credit society to a multi-service centre (MSC).
  • They must turn into a one-stop shop for both goods and services.
  • The recent decision by NABARD to develop 35,000 PACS into MSCs in mission-mode is a step in this direction.

How this will help:

  • The initiative will enable PACS to support farmers in post-harvest marketing activities and provide ancillary services to its members like:
    • creation of storage and processing facilities
    • custom hiring centers
    • collective purchase of inputs
  • This intervention will help in structuring these services in a sustained and scalable manner, covering a much larger number of PACS.
  • This will also help in increasing non-fund based income of the PACS.
  • On the sidelines, a PACS can also play a major role by integrating its warehouse with physical and financial supply chain of agro-commodities in the upcoming Gramin Agriculture Markets (GrAMs) or large warehouses in private sector.

PACS can do this by using the AIF scheme:

  • PACS have historically struggled with challenges of financial viability and shortage of qualified human resources.
  • A separate line of credit has been set up under AIF by reserving concessional refinance of Rs 5,000 crore at 3% during FY21.
  • PACS will get term-loans at 4%,which, with interest subvention under AIF, will come down to just 1%.
  • Other grants would also be made available to the cooperative banks for capacity building, project management expenses and ICT initiatives, all of which will finally impact the PACS.


  • No commercial bank branch can even come close to providing the kind of services a PACS can, and that itself shows just why PACS need to be propped up.
  • Overall, the short-term cooperative credit eco-system with over 15,000 branches and over 95,000 PACS and which took a hundred years to evolve, deserves help to succeed.
  • Helping them turn into multi-service societies may just as well be the last chance we have of giving them this chance.