Reserve Bank of India plans to launch payments bank

Reserve Bank of India is planning to launch payments bank in the country, the central bank’s deputy governor HR Khan has said.

The idea of payments banks was first proposed by Reserve Bank of India board member Nachiket Mor and team.

Khan said there is huge potential for financial inclusion with focus on remittances by involving payment system product.

The payments bank will provide deposit and payment services, but not extended loans. When compared to traditional full-service banks, which requires INR5bn ($83.8m), the new payments bank can be set up with just INR500m ($8.3m).

Mor’s plan also included providing permissions for existing banks to create payments bank subsidiaries by converting prepaid payment issuers (PPIs).

Meanwhile, RBI is also discussing with the government to update inflation-indexed bonds to attract retail investors.

Khan said they had launched inflation-indexed bonds that were not successful.

"We are coming out with the revised version," Khan added.