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Q49 (IAS/2020) Economy › Agriculture & Rural Economy › Agricultural credit system Official Key

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 ?

Result
Your answer: —  ·  Correct: B
Explanation

The correct answer is Option 2.

Statement 1 is incorrect: According to data from NABARD and the RBI, Scheduled Commercial Banks (SCBs) hold the largest share in agricultural credit disbursement (approx. 75-80%), followed by Regional Rural Banks (RRBs). While District Central Cooperative Banks (DCCBs) play a vital role, their share in short-term credit delivery is significantly lower than that of SCBs.

Statement 2 is correct: DCCBs act as a crucial intermediary in the three-tier Short-Term Cooperative Credit Structure (STCCS). Their primary function is to mobilize resources and provide financial assistance to Primary Agricultural Credit Societies (PACS) at the village level. They bridge the gap between the State Cooperative Bank at the apex level and the PACS at the grassroots level, ensuring liquidity for agricultural operations.

Therefore, only the second statement accurately reflects the functional role of DCCBs in the Indian rural banking framework.

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Q. Consider the following statements : 1. In terms of short-term credit delivery to the agriculture sector, District Central Cooperative Ban…
At a glance
Origin: Mixed / unclear origin Fairness: Moderate fairness Books / CA: 5/10 · 0/10

This is a classic 'Trend vs. Structure' question. Statement 1 tests your grasp of the 'Volume Hierarchy' (who lends the most?), while Statement 2 tests the 'Institutional Hierarchy' (who funds whom?). If you skipped the 'Sources of Agricultural Credit' pie chart in the Economic Survey or NCERT, you likely guessed on Statement 1.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Do District Central Cooperative Banks (DCCBs) in India deliver more short-term credit to the agricultural sector than Scheduled Commercial Banks and Regional Rural Banks?
Origin: Weak / unclear Fairness: Borderline / guessy
Indirect textbook clues
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Co-operative Banks: > p. 81
Strength: 5/5
“Multi-State UCBs are registered as cooperative societies under the provisions of Multi-State Cooperative Societies Act, 2002 and are regulated by the Central Registrar of Cooperative Societies (CRCS).• The rural co-operative credit system in India is primarily mandated to ensure flow of credit to the agriculture sector. It comprises short-term and long-term co-operative credit structures. The short-term co-operative credit structure operates with a threetier system – State Cooperative Banks (StCBs) at the State level, (District) Central Cooperative Banks (DCCBs) at the district level and Primary Agricultural Credit Societies (PACS) at the village level. A PACS is organized at the grass roots level of a village or a group of small villages.”
Why relevant

Describes the rural cooperative credit system as a mandated short-term credit structure with a three-tier arrangement placing DCCBs at the district level (State CBs – DCCBs – PACS).

How to extend

A student could use this structural role plus district-level maps/population of farmers to infer DCCBs' geographic reach and compare it with branch/disbursement data of SCBs/RRBs to judge relative short-term credit delivery.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 8: Financial Market > 2020 > p. 246
Strength: 4/5
“Indian Economy • 3. If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? • 1. Cut and optimise the Statutory Liquidity Ratio• 2. Increase the Marginal Standing Facility Rate• 3. Cut the Bank Rate and Repo Rate Select the correct answer using the code given below: (a) 1 and 2 only (b) 2 only (c) 1 and 3 only (d) 1, 2 and 3 4. Consider the following statements: 1. In terms of short-term credit delivery to the agriculture sector, District Central Co-operative Banks (DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.”
Why relevant

Contains the exact claim as a testable statement in a question item, indicating this is a recognized comparative assertion in study material (but not proven here).

How to extend

One could treat this as a hypothesis to test by obtaining quantitative disbursement figures (short-term agricultural loans) for DCCBs vs SCBs vs RRBs from RBI/NABARD reports.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Co-operative Banks: > p. 82
Strength: 4/5
“Regional Rural Banks (RRB) were established in 1975 under the provisions of the Regional Rural Banks Act, 1976 with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs. RRBs are owned by the Central government, concerned State government and the sponsor bank in proportion of 50:15:35 (each RRB is sponsored by a particular bank). RRBs need to provide 75% of the lending to priority sectors. RRBs are under the supervision of NABARD.”
Why relevant

Explains RRBs' mandate to develop the rural economy and that RRBs must provide 75% of lending to priority sectors, highlighting that RRBs are also structurally committed to agricultural lending.

How to extend

A student could compare the 75% priority-sector requirement and RRB coverage with DCCB mandates and district penetration to estimate which institution type likely supplies more short-term farm credit locally.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > iii) Kisan Credit Cards (KCC): > p. 75
Strength: 4/5
“Under this scheme, short-term agriculture loan up to ₹3 lakh is available at 7 per cent per annum to farmers engaged in Agriculture and other Allied activities, including Animal Husbandry, Dairying, Poultry, Fisheries etc. An additional 3 per cent subvention (Prompt Repayment Incentive) is also given to the farmers for prompt and timely repayment of loans. Therefore, if a farmer repays his loan on time, he gets credit at 4 per cent per annum. The scheme is implemented through public and private sector banks and RRBs and Cooperatives. So, while 'KCC' is implemented by RBI, 'Interest Subvention' is a Govt. of India (Ministry of Agriculture) scheme.”
Why relevant

Describes the Kisan Credit Card scheme (short-term agricultural credit) being implemented through public/private banks, RRBs and cooperatives, showing multiple providers of short-term farm credit.

How to extend

Using KCC rollout/issuance data by provider (available in public reports), a student could attribute KCC-based short-term credit shares to DCCBs versus SCBs and RRBs to test the claim.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 12. NABARD: > p. 83
Strength: 4/5
“• NABARD was established in 1982 under the provisions of National Bank for Agriculture and Rural Development Act 1981.• NABARD provides credit for the promotion of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas• NABARD acts as coordinator/supervisor in the operations of rural credit institutions like RRBs and Rural Cooperative Banks (RBI has delegated its supervisory powers in case of rural sector to NABARD while retaining its regulatory powers)• NABARD assists in policy formulation of Govt. of India, RBI and State Governments on matters related to agricultural credit and rural development.• Offers training and research facilities for banks, cooperatives and organizations in matters relating to rural development• It does not extend direct credit at individual level but extends indirect financial assistance by way of refinance (NABARD finances those institutions which provide financial assistance to rural sector).”
Why relevant

Notes NABARD's supervisory/coordination role for rural credit institutions like RRBs and rural cooperative banks and that NABARD provides refinance support to institutions that lend to the rural sector.

How to extend

A student could examine NABARD refinance/flow-of-funds data to institutions (DCCBs, RRBs, SCBs) as a proxy for their relative volumes of agricultural short-term lending.

Statement 2
Is providing funds to Primary Agricultural Credit Societies (PACS) one of the most important functions of District Central Cooperative Banks (DCCBs) in India?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Co-operative Banks: > p. 81
Presence: 4/5
“Multi-State UCBs are registered as cooperative societies under the provisions of Multi-State Cooperative Societies Act, 2002 and are regulated by the Central Registrar of Cooperative Societies (CRCS).• The rural co-operative credit system in India is primarily mandated to ensure flow of credit to the agriculture sector. It comprises short-term and long-term co-operative credit structures. The short-term co-operative credit structure operates with a threetier system – State Cooperative Banks (StCBs) at the State level, (District) Central Cooperative Banks (DCCBs) at the district level and Primary Agricultural Credit Societies (PACS) at the village level. A PACS is organized at the grass roots level of a village or a group of small villages.”
Why this source?
  • Describes the short-term rural cooperative credit structure as a three-tier system with DCCBs at district level and PACS at village level.
  • Frames the system's mandate as ensuring flow of credit to the agriculture sector, implying inter-tier funding to PACS.
Understanding Economic Development. Class X . NCERT(Revised ed 2025) > Chapter 3: MONEY AND CREDIT > Loans from Cooperatives > p. 46
Presence: 3/5
“Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible such as farmers cooperatives, weavers cooperatives, industrial workers cooperatives, etc. Krishak Cooperative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the Cooperative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place.”
Why this source?
  • Explains that village-level cooperatives obtain bank loans and then use those funds to lend to members, illustrating how higher-level institutions supply funds downward.
  • Demonstrates the cooperative-sector practice of financial intermediation that would include district-level banks funding grassroots PACS.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 12. NABARD: > p. 83
Presence: 2/5
“• NABARD was established in 1982 under the provisions of National Bank for Agriculture and Rural Development Act 1981.• NABARD provides credit for the promotion of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas• NABARD acts as coordinator/supervisor in the operations of rural credit institutions like RRBs and Rural Cooperative Banks (RBI has delegated its supervisory powers in case of rural sector to NABARD while retaining its regulatory powers)• NABARD assists in policy formulation of Govt. of India, RBI and State Governments on matters related to agricultural credit and rural development.• Offers training and research facilities for banks, cooperatives and organizations in matters relating to rural development• It does not extend direct credit at individual level but extends indirect financial assistance by way of refinance (NABARD finances those institutions which provide financial assistance to rural sector).”
Why this source?
  • Describes NABARD's role in providing refinance and coordination to rural cooperative banks that operate in the credit supply chain.
  • Supports the existence of higher-level financing channels that enable district-level cooperative banks to fund grassroots credit bodies like PACS.
Pattern takeaway: UPSC frequently tests 'Economic Scale Intuition'. They will assert that a niche or local body (like DCCBs) outperforms a national giant (SCBs). If you know the general magnitude of the Indian economy, you can spot these disproportionate comparisons immediately.
How you should have studied
  1. [THE VERDICT]: Standard Question. Statement 2 is direct static (NCERT/Vivek Singh), while Statement 1 is a 'Trend' fact derived from Economic Survey data.
  2. [THE CONCEPTUAL TRIGGER]: 'Institutional Credit to Agriculture' – specifically the relative share of SCBs, RRBs, and Cooperatives.
  3. [THE HORIZONTAL EXPANSION]: Memorize the Credit Volume Hierarchy: SCBs (~75-80%) > Cooperative Banks (~12-13%) > RRBs (~11-12%). Also, know the Priority Sector Lending (PSL) targets: Domestic SCBs (40%), RRBs (75%), Small Finance Banks (75%).
  4. [THE STRATEGIC METACOGNITION]: When studying any sector (Agriculture, MSME, Housing), never stop at definitions. Always ask: 'Who is the biggest player?' and 'What is the ranking?' UPSC loves swapping the dominant player (SCBs) with a smaller one (DCCBs) to test your sense of economic scale.
Concept hooks from this question
📌 Adjacent topic to master
S1
👉 Three-tier short-term rural cooperative credit structure
💡 The insight

DCCBs are the district-level tier in the short-term cooperative credit system that channels agricultural credit to villages via PACS and coordinates with State Cooperative Banks.

Understanding the three-tier structure is high-yield for questions on rural finance and agricultural credit delivery; it links to institutional roles, grassroots credit flow, and comparative analyses of banking channels in rural India. Mastery enables clear differentiation between cooperative tiers and their policy implications.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Co-operative Banks: > p. 81
🔗 Anchor: "Do District Central Cooperative Banks (DCCBs) in India deliver more short-term c..."
📌 Adjacent topic to master
S1
👉 Regional Rural Banks: mandate, ownership and priority lending
💡 The insight

RRBs are specifically mandated and structured to provide rural and agricultural credit, with defined ownership and a 75% priority-sector lending requirement.

RRB fundamentals frequently appear in questions on rural development and banking sector reforms; they connect to topics on priority sector norms, institutional ownership models, and comparative roles of rural credit providers, helping answer evaluative and policy-impact questions.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Co-operative Banks: > p. 82
🔗 Anchor: "Do District Central Cooperative Banks (DCCBs) in India deliver more short-term c..."
📌 Adjacent topic to master
S1
👉 NABARD's role in rural credit and supervision
💡 The insight

NABARD coordinates and supervises rural credit institutions, including RRBs and rural cooperative banks, and provides refinance support rather than direct lending.

NABARD is central to agricultural credit policy and institutional oversight; knowing its functions is crucial for questions on rural finance architecture, credit delivery mechanisms, and regulatory responsibilities. This concept links fiscal/monetary policy, rural development, and institutional reforms.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 12. NABARD: > p. 83
🔗 Anchor: "Do District Central Cooperative Banks (DCCBs) in India deliver more short-term c..."
📌 Adjacent topic to master
S2
👉 Three-tier rural cooperative credit structure
💡 The insight

DCCBs occupy the district tier between State Cooperative Banks and PACS, forming the conduit for agricultural credit flow.

High-yield for questions on rural credit architecture and agricultural finance; connects institutional roles (StCB, DCCB, PACS) and clarifies pathways of credit delivery to farmers. Mastery helps answer questions on responsibilities, funding flow, and policy interventions.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Co-operative Banks: > p. 81
🔗 Anchor: "Is providing funds to Primary Agricultural Credit Societies (PACS) one of the mo..."
📌 Adjacent topic to master
S2
👉 PACS as grassroots credit providers
💡 The insight

PACS are the village-level cooperative that provides loans to farmers using funds sourced from higher-level banks and schemes.

Essential for questions on rural credit delivery, schemes targeting farmer finance (e.g., KCC, financing under AIF), and cooperative operations; links to topics on rural development, credit access, and grassroots institutions.

📚 Reading List :
  • Understanding Economic Development. Class X . NCERT(Revised ed 2025) > Chapter 3: MONEY AND CREDIT > Loans from Cooperatives > p. 46
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.12 Agriculture Infrastructure Fund > p. 320
🔗 Anchor: "Is providing funds to Primary Agricultural Credit Societies (PACS) one of the mo..."
📌 Adjacent topic to master
S2
👉 NABARD's refinancing and coordination role
💡 The insight

NABARD provides refinance and coordinates operations of rural cooperative banks, enabling those banks to fund grassroots credit institutions.

Crucial for questions on institutional architecture of agricultural finance, supervisory roles, and how policy instruments (refinance) support credit flow; helps connect institutional mandate to on-ground credit availability.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 12. NABARD: > p. 83
🔗 Anchor: "Is providing funds to Primary Agricultural Credit Societies (PACS) one of the mo..."
🌑 The Hidden Trap

While the Short-Term Cooperative structure is 3-tier (State Co-op -> DCCB -> PACS), the Long-Term structure is often 2-tier (State Co-op Agriculture & Rural Development Banks -> Primary CARDBs). UPSC may swap these tiers or ask about the 'Dual Control' problem (RBI regulates banking functions, Registrar of Co-ops regulates management).

⚡ Elimination Cheat Code

Use the 'Scale Heuristic'. Scheduled Commercial Banks include giants like SBI, PNB, and HDFC. DCCBs are district-level entities. It is economically improbable for district-level co-ops to out-lend the entire commercial banking network of India. If a statement claims a 'David' beats a 'Goliath' in volume, be highly skeptical.

🔗 Mains Connection

Mains GS3 (Agriculture & Financial Inclusion): The weakness of DCCBs and PACS is a primary reason why small/marginal farmers still rely on moneylenders (non-institutional credit). This links directly to the 'Doubling Farmers Income' and 'Cooperative Federalism' themes.

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SIMILAR QUESTIONS

IAS · 1999 · Q50 Relevance score: 3.29

The farmers are provided credit from a number of sources for their short and long-term needs. The main sources of credit to the farmers include

CAPF · 2013 · Q93 Relevance score: 0.12

Which among the following agencies disbursed maximum credit to the agricultural sector in India between 2006-07 and 2011-12?

IAS · 2023 · Q74 Relevance score: -0.05

Consider the following statements : 1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived. 2. In an SHG, all members of a group take responsibility for a loan that an individual member takes. 3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs. How many of the above statements are correct?