##ment capacity. banks will have to evolve policies to address this issue while providing vulnerable groups opportunities to engage in activities that supplement the household income at times of natural calamities. development of appropriately priced insurance products is obviously a challenge especially id such insurance has to be affordable and sustainable. price risk in agriculture is inherent, having regard to the nature of agricultural operations where supply cannot respond to prices immediately. hence, price support policies have been followed over the years. a more recent development is the futures markets, which can provide opportunity to hedge risks. however, the players in these markets are mostly traders and speculators. there is a need to find ways in which commodity markets can be used to provide price support to farmers. o micro finance a separate strategy for micro finance may have to be evolved, as this involves providing low income families with access to banking. invariably banks have found it advantageous to partner with community based organisations and ngos working in the area for microfinance. promoting shgs, nurturing them and transforming them from micro - finance to micro enterprise is something many banks are already engaged in. banks could explore the possibilities of working with the state governments by offering them efficient technology solutions, such as smart cards for distribution of budgeted allocations for nregp, pension payments and various other social sector expenditures. as some of you may be aware, a pilot project is under way in andhra pradesh ( ap ), where the ap government will tie up with banks, who will offer smart cards to bpl families / pension recipients / nregp workers for disbursements of wages, pensions and other benefits. these smart cards can be operated at village level through vos – federated shgs registered as cooperatives – that are eligible to be used as business correspondents by banks. it is expected that as the shg members get used to the smart cards, there will be return flow of funds as they use their bank accounts for savings. the cards could also be used as normal debit cards at merchant establishments. o regional rural banks ( rrbs ) as partners one in every three rural / semi urban branch in the country is an rrb branch. moreover, the staff members of rrbs belong to the region and have knowledge of local language and customs. these are significant strengths and need to be leveraged by sponsor banks, who should view rrbs as their partners in rural banking. the initial costs for up scaling technology and skills in the rrbs will be amply rewarded

by the benefits that would accrue in due course. conclusion competition in urban areas is squeezing bank margins. even though agriculture contributes only 20 per cent of gdp, the rural population constitutes 70 per cent of population and as reported accounts for 60 per cent of consumer durable market. this implies that there is an untapped business potential for aggressive banking in the rural areas. the challenge lies in locating these areas and providing them with the financial services through appropriate delivery channels and products. i am sure that the banks with their extensive network of branches in the rural areas will be able to leverage their presence and meet these challenges. my thanks to the indian banks association and rural marketing agencies association of india for giving me this opportunity for delivering the keynote address at this conference. i am sure that the day ’ s deliberations will bring new insights to banking in the hinterland. i wish the conference every success. thank you.