Its loans are smaller than those given by the Bank of Baroda branch in the village. But it is faster at lending to small farmers. Says Rashid Gulab Sheikh, a farmer in his late fifties, “If you are a two acre farmer, a loan from the bank (Bank of Baroda) will take 2-3 months to come. The Society gives the loans in 8 days.”
Mardi’s ‘Society’ Bank is a Primary Agricultural Cooperative Society (PACS). Low-profile cogs in India’s agricultural credit machinery, these are the field outposts of the three-tiered cooperative society lending structure that currently accounts for 17% of all agricultural loans.
Over the last few months, PACS have been seeing a pitched battle over their future. This January, the report of an RBI-appointed committee to study the functioning of the cooperative lending structure recommended they be converted into banking correspondents for District Credit Cooperative Banks – the second tier of the cooperative society lending structure. Once the RBI accepted the recommendation, Nabard, whose chairman Prakash Bakshi was chaired the RBI committee, issued operational guidelines.
Such a transition, says the rural lending institution, is the only way to save the PACS. However, opponents of the plan, like IIM Bangalore professor and rural finance expert MS Sriram say the idea will kill the PACS, not save them.