RBI panel moots banks for low income households

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A Reserve Bank of India panel has recommended setting up a special category of lenders that would exclusively cater to small businesses and low income households to expand the number of customers with access to banking services.

The panel said these banks would focus on providing payment services and deposit products, with a maximum balance of 50,000 rupees, to its target customers.

The report also recommended setting up a category of wholesale banks in India that would provide funds to other banks and financial institutions that directly lend to low income households.

The recommendations come before the RBI is due to issue new banking licenses as part of efforts to improve the financial reach in a country where 60 percent of people do not have a bank account and nearly 90 percent of small businesses have no formal financial access.

The recommendations were issued by a panel set up by RBI Governor Raghuram Rajan soon after he joined office in September and is headed by veteran banker Nachiket Mor.

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