Organisation and Function of PACSs or, Primary Agricultural Credit Societies

Organisation and Function of PACSs or, Primary Agricultural Credit Societies

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The foundation of the three-tiered cooperative credit framework is thePrimary Agricultural Credit Society. It is a village-level organisation that works directly with rural residents. It promotes savings among farmers, takes deposits from them, lends money to those in need, and collects payments. It acts as the final connection between the primary borrowers—the rural population—and the higher agencies, such as the Central Cooperative Bank, State Cooperative Bank, and Reserve Bank of India. A hamlet may establish a primary agricultural credit society with 10 or more members. The minimal membership price makes it possible for even the most struggling farmer to join. Because of the society's members' limitless liability, each bears complete responsibility for the whole damage incurred by the group in the event of its collapse. An elected body is in charge of the society's management.

Capital - The major credit Societies' operating capital is derived from their own money, deposits, borrowings, and other sources. Own funds are made up of reserve money, membership dues, and share capital. Both members and non-members can make deposits. The majority of borrowings come from central cooperative banks. In actuality, the Societies' primary source of working cash is borrowing. Due to poverty, poor saving habits, and a lack of better assets available to savers in terms of rate of return and riskiness from these Societies, people typically do not deposit their money with cooperative Societies.

Coverage - More than 96% of rural areas were serviced by 88 000 primary agricultural societies in 1999–2000. There were 8.68 crore members of these Societies. The Reserve Bank has been working with State governments over the past few decades to reorganise the viable primary credit Societies and combine non-viable Societies with sizable multipurpose Societies.

With the exception of Gujarat, Maharashtra, and Jammu & Kashmir, practically all states have finished the process of reorganising primary Societies into strong and functional entities. Reorganization is to blame for the decline in the number of primary Societies from 92 thousand in 1999-2000 to 105 thousand in 1950-51, 212 thousand in 1960-61.

Loans Advanced - There has been a steadily increasing trend in the loans advanced by the major credit societies. From Rs. 23 crore in 1950–51 to Rs. 202 crore in 1960–61, and then to Rs. 13600 crore in 1999–2000, they increased significantly. Only Society members are eligible to borrow money from them. The majority of the loans is for agricultural uses and is short-term loans. The loans have reasonable interest rates. It is anticipated that the Societies will raise the loan amounts given to the less wealthy members of the rural population, particularly the small and marginal farmers. However, there is a significant issue with the Societies' past-due debts, which rose from Rs. 6 crore in 1950–1951 to Rs. 44 crore in 1960–1961 and Rs. 2875 crore in 1991–1992.