Question 76 from UPSC CSE 2020 - ECONOMICS

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 Agriculture Credit Societies.
Which of the statements given above is/are correct?

IASCODEX · Accepted Answer

Correct Option: B. 2 only

Strategy: The strategy involves evaluating statement 1, which claims District Central Cooperative Banks (DCCBs) deliver more agricultural short-term credit than Scheduled Commercial Banks (SCBs) and Regional Rural Banks (RRBs). This claim is incorrect, as SCBs provide the largest share of such credit. Statement 2, asserting that DCCBs act as intermediaries for funds to Primary Agriculture Credit Societies (PACS), aligns with their standard functioning. Therefore, the correct option is '2 only'.

Key Info: ## District Central Cooperative Banks (DCCBs)

DCCBs are key components of India's three-tier short-term cooperative credit structure:
*   **Apex Level:** State Cooperative Banks (StCBs)
*   **Intermediate Level:** DCCBs (operating at the district level)
*   **Grassroots Level:** Primary Agricultural Credit Societies (PACS)

### Role and Function

DCCBs serve as the financial link between StCBs and PACS. They receive funds from StCBs and channel them to PACS, which then extend credit to individual farmers and rural borrowers, primarily for agricultural and allied activities. Providing funds to PACS is the most important function of DCCBs.

### Agricultural Credit Distribution

In terms of overall credit flow to the agriculture sector:
*   **Scheduled Commercial Banks (SCBs):** Dominate, disbursing approximately 75-80% of agricultural credit.
*   **Regional Rural Banks (RRBs):** Provide about 10-12%.
*   **Rural Cooperative Banks (including DCCBs):** Contribute a similar or slightly lesser share compared to RRBs, representing a minor portion compared to SCBs.

### Regulation and Challenges

The Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) regulate and supervise cooperative banks, including DCCBs, to ensure effective credit delivery.

Major challenges facing DCCBs include:
*   Limited outreach
*   Financial health concerns
*   Governance issues

**Examples:** Krishna DCCB (Andhra Pradesh), Ahmedabad DCCB (Gujarat).

IASCODEX · Answer

Option A: 1 only

IASCODEX · Answer

Option C: Both 1 and 2

IASCODEX · Answer

Option D: Neither 1 nor 2