PACS Full Form-Primary Agricultural Credit Societies

Primary Agricultural Credit Societies (PACS): Role, Functions, and Importance in Rural Finance 

Introduction 

Primary Agricultural Credit Societies (PACS) are the cornerstone of India's rural credit system. These grassroots-level cooperative institutions provide short-term and medium-term credit to farmers and rural communities, enabling them to meet their agricultural and financial needs. PACS play a vital role in ensuring financial inclusion in rural areas by offering easy access to credit, thereby reducing dependence on informal moneylenders. 

This article delves into the role, structure, functions, challenges, and significance of Primary Agricultural Credit Societies in India's cooperative banking framework. 

What are Primary Agricultural Credit Societies (PACS)? 

PACS are cooperative credit institutions operating at the village level that provide financial services to farmers, small traders, and rural households. They form the lowest tier of the three-tier cooperative credit structure in India, which includes: 

1. State Cooperative Banks (SCBs) at the state level. 

2. District Central Cooperative Banks (DCCBs) at the district level. 

3. Primary Agricultural Credit Societies (PACS) at the village level. 

PACS serve as the first point of contact for farmers seeking agricultural credit, inputs, and other essential banking services. 

Objectives of PACS 

• Provide short-term agricultural credit to farmers for purchasing seeds, fertilizers, pesticides, and other inputs. 

• Promote savings and financial discipline among rural populations. 

• Offer storage and marketing support for agricultural produce. 

• Reduce the influence of moneylenders by offering institutional credit at lower interest rates. 

• Support small and marginal farmers, landless laborers, and weaker sections of society through various schemes. 

Functions of PACS 

1. Credit Disbursement 

• PACS provide short-term and medium-term loans for agricultural and allied activities. 

• They facilitate easy loan repayment based on crop cycles and harvest seasons. 

2. Procurement of Agricultural Inputs 

• Many PACS supply seeds, fertilizers, and pesticides at subsidized rates. 

• They help ensure the availability of quality inputs for farmers at reasonable prices. 

3. Marketing and Storage 

• PACS assist farmers in marketing their produce and securing fair prices. 

• They provide storage facilities, reducing post-harvest losses. 

4. Deposit and Savings Services 

• PACS encourage rural communities to open savings accounts and build financial discipline. 

• They mobilize savings and reinvest them for productive purposes. 

5. Implementation of Government Schemes 

• PACS play a key role in disbursing government subsidies and benefits under schemes like PM-KISAN and KCC (Kisan Credit Card). 

• They collaborate with NABARD and other financial institutions for rural development projects. 

Structure and Membership of PACS 

Membership 

• PACS are cooperative societies formed by local farmers and rural residents. 

• They operate on democratic principles, where members elect a managing committee. 

• Membership is open to farmers, rural artisans, and other eligible individuals engaged in agriculture-related activities. 

Capital and Funding 

• PACS raise funds through members’ share capital, deposits, borrowings, and government assistance. 

• They receive credit from District Central Cooperative Banks (DCCBs), which are refinanced by NABARD (National Bank for Agriculture and Rural Development). 

Challenges Faced by PACS 

Despite their crucial role in rural finance, PACS face several challenges: 

1. Limited Financial Resources 

a. Many PACS struggle with inadequate capital and dependence on government aid. 

2. Poor Loan Recovery 

a. High rates of loan defaults affect the sustainability of these institutions. 

3. Lack of Professional Management 

a. Many PACS are run by individuals with limited financial and banking expertise. 

4. Technological Backwardness 

a. Many societies still operate with manual record-keeping, making financial transactions inefficient. 

5. Political and Administrative Interference 

a. Excessive government control and political involvement often hinder their independent functioning. 

Reforms and Modernization of PACS 

To strengthen PACS and improve their effectiveness, the government and NABARD have initiated various reforms: 

• Computerization and Digital Banking 

o The government is promoting the digitalization of PACS to enhance transparency and efficiency. 

• Financial Support and Recapitalization 

o NABARD provides financial aid for the revival and strengthening of weak PACS. 

• Training and Capacity Building 

o Programs to train PACS personnel in modern banking, loan management, and financial planning. 

• Expansion of Services 

o Encouraging PACS to offer microfinance, insurance, and non-farm loans to diversify revenue streams. 

Significance of PACS in Rural Development 

1. Enhancing Agricultural Productivity 

• By providing timely credit and quality inputs, PACS contribute to improved farm yields and income levels. 

2. Promoting Financial Inclusion 

• PACS bring banking services to rural areas, ensuring easy access to credit and savings facilities. 

3. Strengthening Rural Economy 

• By supporting farmers and rural entrepreneurs, PACS play a crucial role in boosting the rural economy. 

4. Reducing Dependence on Informal Credit 

• PACS help curb the exploitation of farmers by eliminating moneylenders and offering institutional credit at affordable rates. 

Primary Agricultural Credit Societies (PACS) serve as the backbone of India's rural credit system, ensuring that farmers and rural communities have access to financial services. Despite facing several challenges, PACS remain a vital institution for promoting agricultural development, financial inclusion, and rural empowerment.