Model Answer

Primary Agricultural Credit Societies (PACS) are village-level cooperative credit societies that play a crucial role in India’s cooperative credit structure. They are the final tier in a three-layered structure headed by the State Cooperative Banks (SCB) at the state level and followed by the District Central Cooperative Banks (DCCBs) at the district level. Funds flow from SCBs to DCCBs, which then work directly with PACS to provide services to farmers. Each PACS is managed by elected members within the local farming community, ensuring farmer representation and accessibility.

Significance of PACS in India

1. Last-Mile Credit Facility PACS are primarily involved in short-term lending, often called crop loans, which is crucial for farmers to secure capital at the onset of the agricultural cycle. By offering timely access to credit, PACS help improve production and farm incomes. The village-level presence of PACS enables them to offer last-mile connectivity that mainstream banks may not provide.
2. Financial Inclusion PACS contribute to financial inclusion in rural India by extending banking services to areas with limited access to formal banking institutions. Farmers who might otherwise lack access to credit are thus empowered, bringing more of the rural population into the financial ecosystem.
3. Ease of Credit Access With simplified and minimal paperwork, PACS offer hassle-free credit services, facilitating faster loan disbursement and immediate access to funds. Office-bearers of the PACS often handle documentation, making the process seamless for farmers.
4. Non-Credit Services Beyond credit, PACS provide essential services like farm advisory, quality input supply, equipment provisioning, output marketing, and technological support. This makes them multi-service centers for the rural community.
5. Encouraging Savings and Credit Discipline By promoting a culture of saving, PACS empower farmers to reinvest in their farms and livelihoods. They also encourage credit discipline, reducing default risks, which strengthens the cooperative credit structure overall.
6. Government Support The Union Budget 2023 allocated ₹2,516 crore for the digitization of 63,000 PACS, aimed at improving transparency and accountability.

Through these services, PACS remain instrumental in supporting rural agricultural development and fostering financial stability at the grassroots level.