NABARD's Untenable Step on Primary Agricultural Credit Societies

The circular dated 22 July 2013 of the National Bank for Agriculture and Rural Development (NABARD) advising District Central Cooperative Banks (DCCBs) and State Cooperative Banks (SCBs) to convert Primary Agricultural Credit Societies (PACS) as their business correspondents (BCs) by taking over their assets and liabilities has expectedly raised strong reactions from certain sections of the cooperative sector. The critics have dubbed it as one with the potential to end the very existence of PACS, which could severely harm farmers’ access to credit.

A subsequent press release issued by NABARD clarifying its own guidelines, though apparently allaying some of the fears, leaves many valid questions about the approach of NABARD in implementing the policy of PACS as BCs unanswered. NABARD’s step comes in the wake of the recommendations made by an Expert Committee of the Reserve Bank of India (RBI) about the future role of Short-term Credit Cooperative Societies in India. While the recommendation of the Expert Committee of RBI on PACS prompting action from NABARD itself need to be debated, what is ominous is the entire approach of NABARD in implementing the recommendation. The manner in which NABARD has gone about implementing the decision smacks of high-handedness, with utter disregard for the autonomy of the states and the spirit of the independence of cooperatives enunciated in the Constitution, post the 97th Amendment.