Previous Year Question
Consider the following statements:
In terms of short-term credit delivery to the agriculture sector, District Central Cooperative Banks deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.
One of the most important functions of District Central Cooperative Banks is to provide funds to the Primary Agricultural Credit Societies.
Which of the statements given above is/are correct?
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Correct Answer: B
Detailed Solution
India’s Short-Term Cooperative Rural Credit Structure generally operates at three levels:
State Cooperative Banks at the State level;
District Central Cooperative Banks at the district level; and
Primary Agricultural Credit Societies at the village level.
State Cooperative Banks provide resources to District Central Cooperative Banks, which in turn finance PACS. PACS maintain direct contact with farmers and extend credit for agricultural and other rural requirements.
Statement 1 is incorrect.
Institutional agricultural-credit data published by the RBI and NABARD show that Scheduled Commercial Banks have accounted for a larger share of agricultural credit delivery than cooperative banks and Regional Rural Banks.
DCCBs constitute an important part of the short-term cooperative agricultural-credit structure, but their volume of credit delivery is not greater than the agricultural credit extended by Scheduled Commercial Banks. Therefore, Statement 1 is incorrect.
The institutional importance of DCCBs should be distinguished from their total volume of lending. They may be crucial within the cooperative rural-credit structure, but Scheduled Commercial Banks account for a larger volume of overall agricultural lending.
Statement 2 is correct.
A major function of a DCCB is to provide financial resources to PACS operating within its district. PACS extend short-term and medium-term credit to farmers for crop production, seeds, fertilisers and other agricultural requirements.
DCCBs perform the following functions:
providing loans or refinancing support to PACS;
accepting surplus funds of PACS as deposits;
balancing funds among cooperative credit institutions;
inspecting, guiding and providing banking support to PACS; and
coordinating rural and agricultural credit at the district level.