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A CONCEPTUAL RESEARCH BASED ON PRIMARY AGRICULTURAL CREDIT FOR ECONOMIC ASSISTANCE TO COMMON PEOPLE
Dr. Satyapal Singh
Associate Professor, Department of Commerce, Govt. College, Hisar
Abstract - Since long before our nation gained its independence, cooperative banks—one of the country's major banking institutions—have played a significant role in the rural economy. Cooperation, self-help, and mutual assistance are the guiding principles of these financial institutions. As the fundamental component of cooperative banks at the village level, Primary Agricultural Credit Societies (PACS) provide small and medium-term loans to marginal farmers and rural artisans for agricultural, non-agricultural, and other purposes. In India, approximately 96000 PACS serve approximately 13.20 crore members at the moment. The main goal of this paper is to find out how many agricultural loans were given out by PACS in different states and UTs across the country and how much of the total loans were given out between 2012-13 and 2018-19. According to the findings of the study, the proportion of agricultural loans paid out by PACS to the total amount of loans is not sufficient. At the conclusion of the study period, it represented only fifty percent of the total loan amount and had only been increased by four percent. In 12 states and UTs, including some states where PACS are playing a dominant role in terms of number, membership, and amount of total loan disbursement, the share of agricultural loans is below 70%. The study comes to the conclusion that the problem of a low proportion of agricultural loans to total loans should be seriously considered. The PACS of states with a low share of agricultural loans and village coverage should take the necessary steps to improve the situation for the benefit of the rural and national economies as a whole.
Keywords: Agricultural loans, total loan disbursement, and the national economy.
1 INTRODUCTION
India is an agricultural nation with the second highest population in the world. The prosperity of the agricultural sector is largely responsible for the country's overall development. This industry contributes to the creation of employment opportunities,
supplies the nation with food, provides basic materials for various industries, and is one of the sources of earnings from abroad. A significant portion of its workforce is directly or indirectly dependent on agriculture. In the past, farmers and other
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agriculturally related individuals relied heavily on unofficial sources to meet their financial needs. As a result, they frequently fell into a
"debt trap" due to high interest rates and other unusual conditions. The provision of financial assistance to all segments of society, particularly the lowest, was one of the primary goals of the nationalization of banks. However, this objective was not entirely met. A significant portion of rural society remained under the control of the informal financial sector because the formal banking sector was unable to reach the lowest levels of society.
In this context, cooperative banks have been crucial in providing farmers and the less fortunate with financial assistance.
A co-operative bank is a financial institution supported by the government that belongs to its members, who are also the bank's owners and customers. It is frequently started by people who share a common interest and are members of the same professional or local community. It was established to shield financially disadvantaged individuals from the clutches of money lenders who offer needy individuals loans at unjustifiably high interest rates.
Open membership, democratic decision-making, and cooperation are the guiding principles of the cooperative structure. "One shareholder, one vote" and "no
profit, no loss" are the guiding principles. The Cooperative Societies Act of 1912 authorizes the registration of cooperative banks. Under the Banking Regulation Act of 1949 and the Banking Laws (Application to Cooperative Societies) Act of 1965, the Reserve Bank of India and the National Bank for Agriculture and Rural Development (NABARD) are responsible for these regulations.
In India, cooperative credit institutions fall into two broad categories: Agricultural Credit Institutions and Non-Agricultural Credit Institutions. The majority of the co-operative credit structure is made up of agricultural credit institutions. There are two categories of agricultural credit institutions: short-term agricultural credit institutions and long-term agricultural credit institutions. The structure of the Short-Term Agricultural Credit Institutions is three-tiered:
a. Each state has a State Cooperative Bank (SCB) at the top;
b. Central Cooperative Banks (DCCBs) are at the intermediate (district) level;
and
c. Primary Agricultural Credit Societies (PACS) are at the village level.
2 REVIEW OF LITERATURE In his paper titled "A Study on Members‘ Awareness and
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Satisfaction of Services Provided by PACCS (Primary Agricultural Co- operative Credit Societies)," P. A.
Venkatchalapathy (2016) found that financial misuse and disproportionate institutional development are caused by a lack of supervision and inspection by the registrar of cooperative societies. Some of the main issues and limitations that the cooperative sector faces include poor loan recovery as a result of a persuasive policy, differential interest rates compared to commercial and private banks, no technological solution that is friendly to customers, a limited area of operation, high transaction costs, and the traditional policy of undiversified lending. He suggested that stakeholders should control the affairs and activities of cooperative institutions and that they should be led by members. In addition, he argued that societies should employ an aggressive marketing strategy to educate members and the general public about the services they provide.
In a paper titled "Role of Primary Agricultural Co-Operative Society (PACS) in Agricultural Development in India," Dr.
Yashoda (2017) [1] investigated the performance and function of PACS in relation to agricultural credit and rural development. According to the study, some of the internal reasons for poor loan recovery in
PACS are a lack of borrower contact, a lack of understanding of rural clients, willful default, and diversification of funds. Other internal reasons include a poor management information system, incorrect borrower identification, poor industrial relations, and a lack of rapport with government agencies. The author came to the conclusion that cooperative banking must be strong and effective to meet the challenges of a competitive environment and must take the necessary measures in order to better serve the agricultural community and improve society's efficiency.
In their paper titled
"Performance and Prospects of Primary Agricultural Credit Societies (PACS) in Haryana during 2000-01 to 2014-15," M. Kumar and V. P. Mehta (2018) [3]
examined the development and trend of PACS in Haryana. They discovered that while the number of viable PACS decreased throughout the study period, it increased overall as a percentage.
In terms of the number of PACS, there was a negative percentage in every district of Haryana. The owned fund contributed very little to total working capital. Over the course of the investigation, deposits have significantly increased, but their proportion in working capital was relatively low.
During the course of the study, the
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number of profit-making PACS decreased.
In their paper titled "Role of Primary Agricultural Co-operative Credit Societies in Agricultural Services (A Case Study of
Kanyakumari District,
Tamilnadu)," R. Sreedevi and S.
Murugan (2018) [5] investigated the PACS's structure and operation in a few selected areas of the Kanyakumari District in Tamil Nadu.
They discovered that the majority of members borrowed money from the PACS because it was easy to get credit there.
However, the agricultural credit that the PACS gives them is not enough for their agricultural activities. They argued that the PACS's management and staff should educate its members about the various services it offers and assist them in using those services.
In their paper titled "Role of Primary Agricultural Cooperative Societies in Rural Financing,"
Shailaja N. R. and C. K. Hebbar (2018)[6] examined the significance of PACS in rural development and the role of PACS in rural financing.
They believed that PACS could successfully carry out a variety of incentive programs that the government had launched for rural development. These can be very helpful in achieving the goals of increasing financial inclusion in rural areas. Over time,
institutional credit for agriculture has grown significantly. PACS play a crucial role in the development of financial inclusion in India by expanding access to agricultural loans, making it easier for rural residents to access goods and services and providing employment
and income-generating
opportunities. The country's rural areas will see inclusive development as a result of this.
3 PRESENT SCENARIO OF PACS IN INDIA
According to information from the National Federation of State Cooperative Banks Limited (NFSCOB) annual report for the year 2018-19 regarding the performance of PACS, as of March 31, 2019, 95995 PACS were operating in India, with 13386 in the Central Zone (13.94 percent), 18569 in the Eastern Zone (19.34 percent), 3570 in the North- Eastern Zone (3.72 percent), 15888 in the Northern Zone (16.56 percent), 14738 in the Southern Zone (15.35 percent), and
There were 65691 viable, 17904 potentially viable, 2650 dormant, and 1512 defunct PACS among these. As of that date, 13.20 crore people were a part of PACS, of which 3.75 crore were small farmers and 6.74 were marginal farmers.
On that particular date, there were a total of 5.10 crore borrowers, of which 2.88 crore
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were marginal farmers and 1.39 crore were small farmers. PACS gave loans and advances to its members for a total of Rs 205894.84 crore, with Rs 5535.13 crore going to the Central Zone, Rs 8658.86 crore to the Eastern Zone, Rs 30.27 crore to the North- Eastern Zone, Rs 40298.65 crore to the Northern Zone, and Rs 28169.86 crore to the Western Zone. In addition, the report states that as of that date, 644089 villages were included in PACS coverage.
3.1 Objectives
The following are the goals of this paper:
1. Observe the number, membership, and percentage of villages covered by PACSs in various states and UTs throughout our nation during the study period.
2. Keep track of the total loans given out by PACSs in various states and UTs, as well as the percentage of agricultural loans spent on them during the study period and
3. Examine whether any significant changes occurred during the same time period.
4 MAJOR FINDINGS
According to the data presented in this paper, thirteen states' PACS play a significant role in our nation. Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala,
Madhya Pradesh, Maharashtra, Orisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal are the states in question.
Madhya Pradesh and Uttar Pradesh's data remained unchanged throughout the study period in all focus areas, specifically no. of PACS and its members, the total and percentage of agricultural loans distributed, and the number of villages covered by PACS in each state during the study period. The data also show that Punjab's performance during the study period was excellent in all areas and has grown strongly in each one. In each of the studied areas, Rajasthan, Kerala, and Karnataka have also experienced satisfactory growth. Despite a significant decrease in the number of loans issued, Andhra Pradesh has seen a significant increase in both total and agricultural loan disbursements of the membership of PACS. While the number of PACS and total and agricultural loan disbursements in Gujarat have both increased, the number has decreased significantly of belonging. No. has increased moderately in Maharashtra of membership, total loan disbursement, and agricultural loan, but a high number of PACS were deducted during the study period. When compared to West Bengal and Tamil Nadu, Orisha and Haryana's performance is also satisfactory.
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The statistics also show that agricultural loans make up too little of the total loans given out. At the conclusion of the study period, it represented only fifty percent of the total loan amount and had only seen a four percent increase.
Additionally, this performance is not satisfactory in some of the thirteen aforementioned states, which play a significant role in our nation. Rajasthan has no agricultural loans, while Kerala has 14.78 percent. In addition to West Bengal, Tamil Nadu, Karnataka, and Maharashtra, the share is insufficient.
5 CONCLUSION
PACS plays a significant role in rural economic development because it serves as a fundamental unit at the village level to provide small and medium-term loans to small and marginal farmers and rural artisans for agricultural, non-agricultural, and other purposes. Our economy is primarily based on agriculture. In addition, PACS provides its members with input facilities in the form of cash or kind, agricultural implements for hire, and a storage facility. According to the current study, there has been a significant improvement in various financial PACS areas across India during the study period, but this improvement is not uniform across the country.
The Southern region's progress is
significantly superior to that of the rest of the country. Consideration should be given to the issue of the low proportion of agricultural loans to total loan disbursements. The PACS of states with low agricultural loan share and village coverage should take the necessary steps to improve the situation.
Increased agricultural and other production, as well as an overall improvement in the rural and national economies, will result
from increased loan
disbursements.
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