PACS - An emerging Insurance Distribution Channel

The Government of India has taken several initiatives in approving the Plan for strengthening Primary Agricultural Cooperative Societies (PACS) and deepening its reach up to the grassroots. It aims at bringing greater transparency and accountability into their operations and enabling them to diversify their business and undertake more activities.

- Paresh Nath Karmakar Retired DGM(IS) United India Insurance Co. Ltd.

Primary Agricultural Credit Societies (PACS) are the grass root level arms of the short-term co-operative credit structure. PACS deals directly with the rural (agricultural) borrowers, disburses loans and collects repayments of loans and undertakes distribution and marketing functions. It operates at the base level, serving as the lowest tier in the three-tier cooperative credit structure. The other two tiers are District Central Cooperative Banks (DCCBs) and State Cooperative Banks (SCBs). In India, the first PACS was established in 1904, following the enactment of the Cooperative Credit Societies Act.

Three different types of cooperative banks function in India - Tier 1, Tier 2 and Tier 3. The functionality of each type of cooperative bank is given below:

Tier-1: State Cooperative Banks

They serve as the highest governing bodies for all cooperative banks within a specific State. These banks play a crucial role in establishing a link between cooperative banks and the Reserve Bank of India.

Tier-2: District/Central Cooperative Banks

These organizations function at the district level and their main purpose is to allocate funds to Primary Agricultural Credit Societies.

Tier-3: Primary Agricultural Credit Societies (PACSs)

These form the foundation of the hierarchical structure. They are mostly in rural areas and directly serve the local population by providing services such as loans and opening deposit accounts.

PACS are registered under the Cooperative Societies Act and are regulated by state governments.

The following is the Organizational Structure of PACS:

General Body of PACS: Exercise the control over Board as well as Management.

Management Committee: Elected by the general body to perform the work as prescribed by society's rules, acts, and bye-laws.