Question

Consider the following statements:

1. In terms of short-term credit delivery to the agriculture sector, District Central Cooperative Banks (DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.

2. One of the most important functions of DCCBs is to provide funds to the Primary Agricultural Credit Societies.

Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Answer 1

Correct Answer - Option 2 : 2 only

The correct answer is only 2.

• Schedules bank contributes to about 70-80% share in agricultural and allied credit. Though co-operative institutions also play a significant role in providing finance to the agriculture sector which stands at 15-16%, hence not as much as Scheduled banks, hence statement 1 is incorrect.
• The co-operative banking sector thrives either as a three-tier or two-tier structure.
  • The three-tier structure includes StCB, DCCB, and PACS.
  • The two-tier structure only StCB and PACS are present.

• In the three-tier structure, the lower level tiers, i.e. DCCB and PACS extend credit to individual borrowers using their own funds/deposits and claim to refinance from the upper tier, i.e. PACS from DCCB/StCB and DCCB from CB.
• In the two-tier structure, PACS provides credit to individual borrowers and claim to refinance from StCB. In some cases, the StCBs also extend credit to the individuals through its branches across the state.
• Hence statement 2 is correct.

About DCCBs

•  The Board of the DCCB comprises elected Chairmen of PACS, representative of the State Government and the State Cooperative Bank apart from the CEO of the DCCB who would be the member secretary.
• DCCBs provide funds directly either to PACs or to the farmers for excavation of wells, purchase of pump sets to horticulture, animal husbandry, and even rural transport like tractors and other farm equipment, etc. Hence statement 2 is correct.