The Short-Term Cooperative Credit Structure: PACS, DCCBs and NABARD

India’s rural cooperative credit system has two structures. One is short-term. The other is long-term. This lesson is mostly about the short-term one.

What are the three tiers?

RBI says the short-term structure works as a three-tier system.

• PACS (Primary Agricultural Credit Societies) sit at the village level.
• Central Cooperative Banks (CCBs) sit at the district level. NABARD and PIB call them DCCBs, short for District Central Cooperative Banks.
• State Cooperative Banks (StCBs) sit at the state level.

So the order from apex to village is StCB, then DCCB, then PACS.

Is NABARD a fourth tier?

No. NABARD’s own chart of the structure lists the StCB as Tier I. It lists the DCCB as Tier II and the PACS as Tier III. NABARD is not in that list.

NABARD was set up in 1982 as an apex body. It coordinates the activities of institutions involved in rural financing. Card 3 shows how it refinances the banks.

Do all states have three tiers?

No. NABARD says the structure varies across states. Not all states have three tiers. Some states have a two-tier structure.

What is the long-term structure?

It has State Cooperative Agriculture and Rural Development Banks (SCARDBs) and their primary banks (PCARDBs). NABARD says the Banking Regulation Act, 1949 does not apply to these institutions.

NABARD’s Annual Report 2023-24 counts each tier. The table gives its figures.

NABARD takes the PACS count from the National Cooperative Database. It counts the StCBs and DCCBs as on 31 March 2024.

Why do sources say 351 and 352?

PIB’s release of 19 August 2025 lists 351 DCCBs. It also lists one Industrial Co-operative Bank. NABARD’s Annual Report counts 352 DCCBs. PIB names that bank as the Tamil Nadu Industrial Co-operative Bank. NABARD says its 352 includes Tamil Nadu Industrial Cooperative Bank Ltd (TAICO). Add one to 351 and you get 352.

Is there one DCCB for every district?

The sources do not say so. They give counts by state, and the counts differ widely.

• Uttar Pradesh has 50 DCCBs.
• Madhya Pradesh has 38.
• Maharashtra has 31.
• Bihar has 23.
• Jammu and Kashmir has 3.

DCCBs work in 20 states and Union Territories. Some states also have a two-tier structure. So “one DCCB per district” is not an exact rule.

What is a PACS?

NABARD calls PACS grassroots institutions in villages. Their member shareholders are individual farmers, artisans and other weaker sections. PACS form the lowest tier of the structure.

How big is the long-term side?

NABARD counts 13 SCARDBs and 602 PCARDBs.

What is a DCCB’s funding role?

UPSC’s 2020 paper has a statement on this. It says one of the most important functions of DCCBs is to provide funds to the PACS. The official answer key marks that statement as correct.

UPSC’s statement says “one of the most important functions”. It does not say “the single most important”.

Does NABARD lend to PACS?

NABARD’s pages name other borrowers.

• Short-term seasonal refinance. NABARD gives it for production purposes at a concessional rate. It goes to StCBs and RRBs, through sanctioned credit limits.
• Repayment. Each withdrawal against the limit is repayable within 12 months.
• Direct borrowing by DCCBs. The revival package let DCCBs borrow funds directly from any financial institution regulated or approved by RBI.
• A product for cooperative banks. NABARD developed the Short Term Multipurpose Credit Product (STMPCP). It gives financial assistance to StCBs and DCCBs.
• Who qualifies. The STMPCP credit limit goes to well-governed, financially strong banks in the “A” and “B” categories.

These refinance pages do not name PACS as borrowers. NABARD’s development-fund tables do show grant support to PACS.

How healthy are DCCBs?

NABARD’s Annual Report gives these figures for FY2023.

• DCCBs’ gross NPA share fell from 11.5% on 31 March 2021 to 9.6% on 31 March 2023.
• Their consolidated net profit rose by 38.5% in FY2023.
• The number of loss-making DCCBs fell from 49 to 46.

NABARD adds that 38 of the 42 DCCBs with CRAR below 9% were in five states and Union Territories. These were Madhya Pradesh, Uttar Pradesh, Bihar, Maharashtra and Jammu and Kashmir.

The government fixes yearly targets for agricultural ground-level credit (GLC). The targets cover scheduled commercial banks (SCBs), regional rural banks (RRBs) and rural cooperative banks (RCBs).

How much was delivered in FY2024?

NABARD’s Annual Report says Rs 25.1 lakh crore (provisional) was disbursed. The target was Rs 20 lakh crore. That beat the target by 25%.

NABARD says much of the extra credit came from SCBs.

Does this show what DCCBs alone deliver?

No. The chart gives one figure for all rural cooperative banks. It does not give a separate DCCB figure.

What is “duality of control”?

RBI says banking laws were made applicable to cooperative societies in 1966. Since then, two sets of authorities have shared control.

• Banking-related functions are regulated by the Reserve Bank.
• Management-related functions are regulated by the State Governments or the Central Government.

RBI regulates the banking functions of StCBs, DCCBs and UCBs under Sections 22 and 23 of the Banking Regulation Act, 1949. The Act applies to cooperative societies in a modified form, called “AACS”. StCBs and DCCBs are registered under their State Cooperative Societies Act.

Who inspects StCBs and DCCBs?

RBI has delegated powers to NABARD to inspect them. The power comes from Section 35(6) of the Banking Regulation Act, as applicable to cooperative societies.

NABARD also supervises RRBs under Section 35(6) of the Banking Regulation Act, 1949. RBI regulates the RRBs.

Who regulates a PACS?

RBI says PACS are outside the purview of the Banking Regulation Act, 1949. So RBI does not regulate them. NABARD says PACS, PCARDBs and SCARDBs do not figure among statutorily supervised entities. It inspects SCARDBs on a voluntary basis.

Why are cooperatives a State matter?

NABARD says cooperative societies are a State Subject under Entry 32 of the State List. A society in one state follows that state’s Act. A multi-state society follows the Multi-State Cooperative Societies Act, 2002.

What did recent banking laws change?

• 2020 amendments. PIB’s note of 27 June 2020 says they do not apply to PACS. They do not affect the powers of State Registrars under state cooperative laws.
• Banking Laws (Amendment) Act, 2025. It was notified on 15 April 2025. Its key provisions took effect on 1 August 2025. It raised the tenure of cooperative bank directors from 8 to 10 years. The chairperson and whole-time director are excluded.

Why was a review needed?

NABARD’s note on the revival package gives two warning signs.

• The share of the cooperative credit structure in agricultural credit fell. It dropped from 62% in 1992-93 to 34% in 2002-03.
• Accumulated losses in the short-term structure were estimated at almost Rs 10,000 crore.

Who led the task force?

The Government of India appointed a Task Force in 2004. Professor A Vaidyanathan chaired it. It was a Government of India task force, not an RBI one.

• The short-term report was made public in draft in January 2005.
• The final short-term report went to the Government in February 2005.
• The long-term report went to the Government in August 2006, after a draft in January 2006.

What was in the revival package?

The package was announced in January 2006. It aimed at legal and institutional reform, better management and financial help. It also covered raising CRAR to 7%.

• The initial estimate was Rs 13,596 crore, with a Government of India share of Rs 9,245.28 crore.
• Special audits as on 31 March 2004 raised the total to Rs 21,739 crore. The Government of India share became Rs 15,902 crore.
• NABARD was named the Implementing Agency.
• 25 States signed the MoU. 23 States had implemented the package.

Carrying out the package also enabled DCCBs to borrow directly from financial institutions that RBI regulates or approves.

When was the Ministry of Cooperation set up?

PIB says the Ministry of Cooperation was set up on 6 July 2021.

What did the Model Bye-laws change for PACS?

The Model Bye-laws were circulated to all States and Union Territories on 5 January 2023. PIB says they let PACS take up more than 25 business activities.

What is the National Cooperation Policy, 2025?

PIB says the policy was launched on 24 July 2025. It has 6 strategic pillars, 16 objectives and 83 recommendations.

• A 48-member committee headed by Suresh Prabhakar Prabhu prepared it.
• The committee held 17 meetings and 4 regional workshops.
• It evaluated and used 648 suggestions from stakeholders.

PIB’s backgrounder lists a goal under the policy. It is to preserve and promote the three-tier PACS, DCCB and StCB credit structure.

How big is the PACS computerisation plan?

The Union Cabinet approved it on 29 June 2022. The plan covered about 63,000 functional PACS over five years. The outlay was Rs 2,516 crore. The Government of India share was Rs 1,528 crore.

PIB’s 2022 release says StCBs and DCCBs were already automated by NABARD. They were on Common Banking Software.

How has the plan grown since 2022?

The 63,000 figure was the plan size in 2022. It is not the present scope.

• PIB of 22 July 2025 says the outlay rose to Rs 2,925.39 crore.
• It also describes a common ERP-based national software. The software links PACS with NABARD through StCBs and DCCBs.
• The same release says 73,492 PACS were sanctioned from 31 States and Union Territories. Of these, 59,920 were onboarded on the ERP.

On 6 July 2026, the Minister said the Government of India had spent Rs 3,000 crore to computerise PACS. He said 50,000 PACS had been declared e-PACS. These are the Minister’s statements in a PIB release. They are not an audit.

What is the Modified Interest Subvention Scheme?

PIB of 28 May 2025 describes MISS as a Central Sector Scheme. It aims to make short-term credit available to farmers at an affordable rate through Kisan Credit Cards.

• Farmers got short-term loans of up to Rs 3 lakh at 7%.
• Eligible lenders got 1.5% interest subvention.
• Farmers who repaid promptly could get up to 3% more relief. This brought the effective rate to 4%.
• The Cabinet approved MISS for FY 2025-26 on that date.

PIB of 4 February 2025 reports a Budget increase in the MISS loan limit from Rs 3 lakh to Rs 5 lakh. The 28 May 2025 release still says up to Rs 3 lakh. These facts are dated to 2025. Newer notices may change them.

What is Sahakar Sarathi?

PIB of 16 December 2025 describes it as a Shared Service Entity for Rural Cooperative Banks. It was registered on 21 July 2025 after RBI approval.

• Its authorised capital is Rs 1,000 crore.
• NABARD, NCDC and the Rural Cooperative Banks hold 33.33% each.
• It provides shared core banking and digital services.

What are the common traps?

• 351 or 352 DCCBs. PIB lists 351. NABARD counts 352, which includes TAICO.
• Who appointed the Vaidyanathan task force? The Government of India did, in 2004. It was not an RBI task force.
• 63,000 PACS. This was the plan size in 2022. A 2025 release shows 73,492 sanctioned.
• NABARD and PACS. NABARD’s seasonal refinance goes to StCBs and RRBs. DCCBs can also borrow directly, from lenders that RBI regulates or approves.
• RBI and PACS. PACS are outside the Banking Regulation Act, 1949.
• Three tiers everywhere. NABARD says some states have two tiers.
• Tier numbers. NABARD’s chart calls the StCB Tier I and the PACS Tier III.
• “One of the most important.” The UPSC statement uses these words about funding PACS.

Who handles which side?

What did UPSC ask in 2020?

UPSC’s official answer key for Set A gives option (b), 2 only. Statement 2 matches the wording above. The key does not mark statement 1 as correct. NABARD’s FY2024 chart gives agricultural credit overall. Cooperative banks disbursed Rs 2.3 lakh crore, commercial banks Rs 19.8 lakh crore and RRBs Rs 3.0 lakh crore. It gives no separate DCCB figure.

The full paper is at UPSC CSP 2020 General Studies Paper I.

Also: RBI overview, NABARD revival note, PIB 2022-06-29, PIB backgrounder.