Context: Recently, the Union Budget has announced Rs 2,516 crore for computerisation of 63,000 Primary Agricultural Credit Societies (PACS) over the next five years.

Aim

• The step aims to  bring greater transparency and accountability in the operations of PACS.

• Also, to enable PACS to diversify their business and undertake more activities.

What are PACS?

• PACS are village level cooperative credit societies that serve as the last link in a three-tier cooperative credit structure headed by the State Cooperative Banks (SCB) at the state level. 

Financial Structure

• The primary credit societies' working capital is derived from their own funds, deposits, borrowings, and other sources.

• Deposits are made by both members and non-members.

• Borrowings are primarily made from central cooperative banks.

• Credit from the SCBs is transferred to the district central cooperative banks, or DCCBs, that operate at the district level. 

• The DCCBs work with PACS, which deal directly with farmers.

• PACS are involved in short term lending — or what is known as crop loan. 

• At the start of the cropping cycle, farmers avail credit to finance their requirement of seeds, fertilizers etc. 

• Banks extend this credit at 7 percent interest, of which 3 per cent is subsidized by the Centre, and 2 per cent by the state government. 

• Effectively, farmers avail the crop loans at 2 percent interest only.

Organisational Structure

• Since these are cooperative bodies, individual farmers are members of the PACS, and office-bearers are elected from within them.

• The membership fee is low enough that even the poorest agriculturist can join.

• A village can have multiple PACS.

Significance of PACS

• It is a village-level institution that works directly with rural residents.

• PACS provides the last mile connectivity to the farmers as the timely access to capital is necessary at the start of their agricultural activities.

• PACS have the capacity to extend credit with minimal paperwork within a short time.

PACS typically offer the following services to their members

• Input facilities in the form of a monetary or in-kind component

• Agriculture implements for hire

• Storage space

Where is computerisation needed?

• While SCBs and DCCBs are connected to the Core Banking Software (CBS), PACS are not, therefore a compatible platform is necessary to bring about uniformity in the system.

• Computerisation of PACS has already been taken up by a few states, including Maharashtra.