Rural Credit Cooperatives in India

Rural Credit Cooperatives have existed in India for a long time. A shortage of supply of rural credit was prevalent in India. To meet the demand for short and long term rural credit the Co-operative Credit Structure (CCS) was set up. While short term credit is supplied by the State Cooperative Banks (SCB), District Central Cooperative Banks (DCCB) and Primary Agricultural Credit Societies (PACS), long term credit is supplied by the Primary Cooperative Agriculture and Rural Development Banks (PCARDB).
Rural Credit Cooperatives were initiated in India long back, some of them, even before India’s Independence in 1947. Post-independence the rural credit cooperative system was developed further. Moreover rural banks were set up. However in spite of such initiatives credit needs of the rural Indian people have not been met effectively. Supply of credit for agriculture too has not matched up to the demand levels.

The resultant effect has been widespread discontent and despair among the rural poor, sometimes leading to extreme actions like suicides by farmers.

Measures were undertaken by the Indian government in 2004, to increase credit supply for agriculture by commercial banks. Moreover banks were also asked to re-organize repayment schedules of farmers who were affected by floods, droughts, etc.
According to World Bank estimates of 1994 and 1995, the average credit utilization was Rs 14,549 per family in a year. While 65% of rural credit in India was utilized for productive purposes, the remaining 35 % was utilized for consumption purposes.

Out of the 65% utilization for productive purposes, short term utilization constituted 49%. Long term utilization (purchase of agricultural machinery, livestock) etc accounted for a mere 16%. Short term consumption (for purchase of consumer durables, clothes, etc) was 20% while long term consumption (for house building, marriage, etc.) was 15%.

The Co-operative Credit Structure (CCS) of India was set up to serve the needs of both short term and long term rural credit in India. Short term credit is supplied in rural India by three institutions –
State Cooperative Banks (SCB)
District Central Cooperative Banks (DCCB)
Primary Agricultural Credit Societies (PACS)
Long term credit is supplied by the Primary Cooperative Agriculture and Rural Development Banks (PCARDB).

In 2007, the World Bank has approved a project related to rural credit cooperatives in India. This project entitled “The Strengthening Rural Credit Cooperatives Project” involves a total cost of an estimated 600 million US dollars and is expected to be completed by June 2012. The National Bank for Agriculture and Rural Development (NABARD) will be implementing the project.

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Last Updated on : 30th July 2013

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