UPMSP Co-operative Studies: Co-operative Credit and Banking

Co-operative Credit and Banking

This domain tests the short-term and long-term credit structure and the lending logic of primary societies.

Structure

Short-term: PACS → District Central Co-operative Bank (DCCB) → State Co-operative Bank (StCB) → NABARD refinance. Long-term: Primary Co-operative Agriculture and Rural Development Bank → State Co-operative Agriculture and Rural Development Bank → NABARD. Urban Co-operative Banks serve urban members and may be scheduled banks.

PACS functions

Accept deposits, lend for crop and allied needs, supply inputs, arrange marketing, and implement Kisan Credit Card limits. Lending follows the 3 Cs-character, capacity, capital-plus safety, liquidity and purpose.

Worked example

A farmer needs ₹60,000 for wheat. The scale of finance is ₹25,000 per hectare and the farmer sows two hectares, so the crop-related limit is ₹50,000. The PACS checks repaying capacity from expected net income and existing dues. It sanctions ₹50,000, not the full demand, and records the KCC limit. Reasoning: the loan is need-based and capacity-based, not demand-based.

Traps

PACS is a primary credit society, not a full commercial bank. DCCB is not a competitor of PACS; it is the federation and refinancing channel. Do not confuse short-term and long-term structures. Overdue loans create NPAs and block refinance.