UPSC Mains 2014 · GS III · Q4 · 12.5 marks · 200 words

“In the villages itself no form of credit organization will be suitable except the cooperative society.” —All India Rural Credit Survey. Discuss this statement in the background of agricultural finance in India. What constraints and challenges do financial institutions supplying agricultural finance face? How can technology be used to better reach and serve rural clients?

हिन्दी में

“गाँवों में सहकारी समिति को छोड़कर, ऋण संगठन का कोई भी अन्य ढाँचा उपयुक्त नहीं होगा।”—*अखिल भारतीय ग्रामीण ऋण सर्वेक्षण*। भारत में कृषि वित्त की पृष्ठभूमि में, इस कथन पर चर्चा कीजिए। कृषि वित्त प्रदान करने वाली वित्तीय संस्थाओं को किन बाध्यताओं और कसौटियों का सामना करना पड़ता है? ग्रामीण सेवार्थियों तक बेहतर पहुँच और सेवा के लिए प्रौद्योगिकी का किस प्रकार इस्तेमाल किया जा सकता है?

Farm Credit and Insurance Banking and Finance

How a topper answered the closest question

Toppers wrote this one in a test series: “What are Primary Agricultural Credit Societies? Can the cooperative push alone help in achieving the twin targets of boosting rural economy and mainstreaming small and marginal farmers?”

Kunal RastogiAIR 15 · CSE 2023 · 243 wordsTheir whole copy

Opening · a definition

Primary Agriculture Credit Society are the lowest Rung of credit distribution via Cooperative model at the district level. Recently, govt allowed Agri. Infrastructure Fund to modernise the PACS Cooperative Push can aid in

Body · points

Cooperative Central board → district cooperative board → PACS RBI → responsible for 14% Credit → PACS → not under RBI; not follow banking regulation

Cooperative Push can aid in

a) boosting Rural Economy

NABARDS refinance can be effectively mobilised by PACS due to awareness of local credit history.

② Increased customised credit flow enables attraction of Private investment ③ Can help via Priority Sector lending MSME Sector → real growth engine [ES-2020] of economy ④ Reduce burden on Schedule commercial banks

b) Main streaming Small & Marginal farmer ① SAS survey (Agri census) - 85% Small & Marginal ② Help channelize idle money of farmers into productive sectors of economy ③ Can promote creation of FPO to leverage economies of Scale ④ Prevent Small and marginal farmer from borrowing → Predatary non-institutional lenders.

limitation of Cooperatives

① Wide spread corruption due to problems of dual regulation. eg → PMC ② lack of professional handholding → inefficiency ③ Limited Credit Creation due to hesitancy of farmers. ④ Outdated digital infrastructure - eg > NCAER → 35% PACS no computer ⑤ Excessive Political interference

Way forward

① Connecting Cooperative banks with Core banking Solutions

② Using NBFC to further augment PAC capacity

③ Allow insurance & Pension Company to invated in Cooperative banks → credit creation

④ Capacity building via Panchasutra Principles

Close · a way forward

Unlocking the cooperative spirit via Sahakar se Samridhi is seminal if India wants to achieve Sarvodaya Se Antyodaya.

3 more toppers’ answers to this question, part by part, and how they all approached it: open the question.

Toppers’ answers to other close questions

Source: UPSC, Civil Services (Main) Examination 2014, General Studies Paper III, Q4. The paper on upsc.gov.in. Themes and links to toppers’ answers are by UPSC Grade, not by UPSC.