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Q49 (IAS/2020) Economy ā€ŗ Agriculture & Rural Economy ā€ŗ 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: ā€”  Ā·  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 Banā€¦
At a glance
Origin: Mixed / unclear origin Fairness: Moderate fairness Books / CA: 5/10 Ā· 0/10
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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
ā€œMulti-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).ā€¢ 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 ā€“ 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.ā€
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 ā€“ DCCBs ā€“ 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
ā€œIndian Economy ā€¢ 3. If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? ā€¢ 1. Cut and optimise the Statutory Liquidity Ratioā€¢ 2. Increase the Marginal Standing Facility Rateā€¢ 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.ā€
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
ā€œRegional 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.ā€
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
ā€œUnder this scheme, short-term agriculture loan up to ā‚¹3 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.ā€
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
ā€œā€¢ NABARD was established in 1982 under the provisions of National Bank for Agriculture and Rural Development Act 1981.ā€¢ 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 areasā€¢ 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)ā€¢ NABARD assists in policy formulation of Govt. of India, RBI and State Governments on matters related to agricultural credit and rural development.ā€¢ Offers training and research facilities for banks, cooperatives and organizations in matters relating to rural developmentā€¢ 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).ā€
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.

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SIMILAR QUESTIONS

IAS Ā· 1999 Ā· 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 Ā· 2013 Ā· 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 Ā· 2023 Ā· 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?