Productive Efficiency of Primary Agricultural Credit Societies in Kerala, India

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Devi Sekhar R, Dr. Sony Vijayan

Abstract

Co-operatives are having great relevance and significance in India because they are inspired by the principles of self-help and equality. Primary Agricultural Credit Societies (PACS) are 95,238 in number and form the base level of short-term co-operative credit structure in India. With more than 13 crores of people as members, these societies play a vital role in the financial inclusion of rural population. Unlike other states in India, people in Kerala have a higher dependency on co-operative credit institutions by having about 60% of its total population as members of PACS. Strengthening these institutions is vital for ensuring a strong foundation for the newly formed Kerala Co-operative Bank because the district and state co-operative banks rely more on PACS for their deposits and advances. In this paper, we are comparing these institutions with their peers and therefore the bench marking technique DEA is found to be more appropriate. The main focus of the study is to develop a model for estimating the productive efficiency of PACS in Kerala. The study has considered 168 PACS across the state of Kerala and found a significant variation in the relative efficiency scores among them. 117 PACS under CRS assumption and 98 PACS under VRS assumption are not even 50% efficient in comparison with their most efficient peers. The relative efficiency scores have been compared with other parameters also. When all PACS are working mostly under the same environment, these relative inefficiencies can be addressed and make these societies more profitable and financially stable.

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