Household savings: RBI to introduce inflation-indexed bonds

The Reserve Bank of India (RBI) together with the Government of India will introduce consumer price inflation-linked savings certificates by November to provide some cover to households, new RBI governor Raghuram Rajan said.

"We will issue inflation-indexed savings certificates linked to the CPI new index to retail investors by the end of November," Rajan said at his maiden media briefing.

To help households tide over inflationary pressures without costly intervening intermediaries, and to raise funding for viable investment opportunities, Rajan said, ''the RBI along with the government, will issue Inflation-Indexed Savings Certificates linked to the consumer price index to retail investors by end- November 2013.''

Rajan said households have expressed a desire to be protected against CPI-based retail inflation, which has been hovering at the double-digits mark for some time now.

It may be noted that the government had, in June, launched inflation-indexed bonds and has already issued it in multiple tranches.

However, outgoing governor D Subbarao had expressed his reservations on the dependability of the CPI number in policy making, saying it is too narrow for an excess focus on food prices.

On the personal banking front, Rajan proposed the setting up of a national grid-based Indian Bill Payment System such that households will be able to use bank accounts to pay school fees utilities, medical bills, and make person to person transfers electronically.

''We want to make payments anywhere, anytime, a reality.''

As announced in its annual monetary policy statement, RBI will facilitate the setting up of ''white'' points-of-sale (POS) devices and mini ATMs by non-bank entities to cover the country so as to improve access to financial services in rural and remote areas.

Besides, RBI will conduct a pilot enabling cash payments using such instruments and Aadhaar based identification to meet payments and remittance needs in remote areas.

Besides, RBI will set up a technical committee to examine the feasibility of using encrypted SMS-based funds transfer using an application that can run on any type of handset. Rajan said the RBI will also work to get banks and mobile companies to cooperate in rolling out mobile payments.

On the Standard and Poor's downgrade threat, Rajan said the international rating agency "nearly reiterated what has been its long standing claim about there being one-third possibility of a rating downgrade...It is not something new. So I won't read too much into the statement."