Cabinet Approves Computerization of Primary Agriculture Credit Societies (PACS)

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved the computerization of Primary Agricultural Credit Societies (PACS) with the goal of increasing PACS's efficiency, bringing transparency and accountability to their operations and allowing PACS to diversify their business and undertake multiple activities/services.

This project proposes the computerization of approximately 63,000 functional PACS over a 5-year period with a total budget outlay of Rs. 2516 crore, with the Government of India contributing Rs. 1528 crore. Primary Agricultural Cooperative Credit Societies (PACS) are the lowest tier of the three-tier Short-term cooperative credit (STCC) in the country, with approximately 13 million farmers as members, and are critical for the development of the rural economy.

PACS account for 41 percent (3.01 million farmers) of all KCC loans given in the country, with 95 percent of these KCC loans (2.95 million farmers) going to Small and Marginal farmers. The NABARD has already automated and implemented Common Banking Software in the other two tiers, namely State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs).

However, the majority of PACS are still not computerized and operate manually, resulting in inefficiency and a lack of trust. In some of the states, stand-alone and partial computerization of PACS has been done. There is no consistency in the software they use, and they are not linked to the DCCBs and StCBs. It has been proposed, under the guidance of Amit Shah, Minister of Home and Cooperation, to computerize all PACS throughout the country and bring them on a common platform at the national level, as well as have a Common Accounting System (CAS) for their day-to-day business.

PACS computerization, in addition to serving the purpose of financial inclusion and strengthening service delivery to farmers, particularly Small and Marginal Farmers (SMFs), will also serve as a nodal service delivery point for various services and the provision of inputs such as fertilizers, seeds, and so on. Apart from improving digitalization in rural areas, the project will help to improve the outreach of PACS as outlets for banking and non-banking activities.

The DCCBs can then enroll as one of the important options for participating in various government schemes (involving credit and subsidy) that can be implemented through PACS. It will ensure faster loan repayment, lower transition costs, faster audits, and a reduction in payment and accounting imbalances with State Cooperative Banks and District Central Cooperative Banks.

The project entails the creation of cloud-based common software with cyber security and data storage, the provision of hardware support to the PACS, the digitization of existing records, as well as maintenance and training. This software will be in vernacular language, with the ability to be customized to meet the needs of the states. PMUs (Project Management Units) will be established at the federal and state levels.

A cluster of approximately 200 PACS will also receive District Level Support. In states where PACS computerization is complete, Rs. 50,000/- per PACS will be reimbursed if they agree to integrate with/adopt the common software, their hardware meets the required specifications, and the software was commissioned after February 1st, 2017.