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Agricultural Credit : Cooperative Credit Societies

Agricultural Credit : Cooperative Credit Societies

Cooperative Credit Societies

  • Till 1970-71, almost whole of institutional credit was provided by the cooperatives However, after the nationalisation of 14 major commercial banks in 1969 and the formation of Regional Rural Banks (RRBs) in 1975, their relative share in total credit flow has consistently decreased.
  • In 2006-07, the corresponding shares of Commercial Banks, Cooperatives and RRBs were 69 per cent, 21 percent and 10 percent respectively.
  • The Cooperatives are organized on a three-tier system, the upper most tier is formed by State Cooperative Bank (SOB) at state level. At the second tier are the Central Cooperative Banks (CCB) organized at District level. The Primary Agricultural Credit Societies (PACS) at village level forms the lowest tier.
  • In addition to the above, Land Development Banks (LDBs) provide long-term rural credit for land improvement, soil conservation etc. LDBs have now been renamed as State Cooperative Agricultural and Rural Development Banks (SCARDBs).
  • In practice, however, the cooperatives are not very efficient in providing agricultural credit. Some of the main deficiencies faced by the cooperatives are lack of autonomy of the PACS, high level of Non-performing assets (NPAs), control over cooperatives’ credit by the larger farmers etc.
  • In 2004, the government appointed a task force with Prof. A. Vaidyanathan as Chairman to recommend a plan of action to revive the rural cooperative credit structure.

Some important recommendations of Vaidyanathan Committee were : 

  • Measures should be taken to strengthen the capital base of cooperative institutions.
  • Their autonomy should be increased by removing excessive government control.
  • Capacity build-up of cooperatives’ personnel at all time should take place.
  • RBI should be empowered to take direct action to enforce prudent financial management by cooperative banks.
  • In January 2006, the government announced a package for the revival of the Short-term Rural Co-operative structure with a financial assistance of Rs. 13, 596 crore. National Bank for Agriculture and Rural Development (NABARD) has been designated the implementing agency for the purpose. 25 states have signed memorandums of understanding (MoUs) with the Central Government and NABARD for the implementation of reforms needed for this package.  Agricultural Credit : Cooperative Credit Societies


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