A committee on financial inclusion appointed by the Reserve Bank of India (RBI) has come up with a suggestion for Indian commercial banks on the lines of Islamic banking, or Shariah-compatible instruments: Interest-free lending to small borrowers and accepting deposits without an obligation to pay interest.

The concept has been described by the panel as "interest-free windows".

"An interest-free window is simply a window within a conventional bank through which customers can conduct business utilising only Shariah-compatible instruments. At the inception of the window, the products typically offered are safekeeping deposits — on the liability side of the bank — and relevant trade-finance products for small and medium companies — on the asset side of the bank," the panel has recommended.

The committee wants such banks to have adequate systems to separate interest-free and conventional funds.

The panel has also recommended installation of more ATMs in rural and semi-urban centres, digitisation of land records and launch of "Gold KCC" or Gold Kisan Credit.

The committee said given the low penetration of ATMs, installing more of them in rural and semi-urban centres will create more touch points for customers, as bank branches per 1 lakh population in rural India continues to be low.

The number of bank branches per 1 lakh people in rural and semi-urban areas was 7.8 as of June 2015, compared to 18.7 in urban and metropolitan areas, says the panel.

At the end of June 2015, there were 1,26,704 bank branches.

The number of "no-frills" accounts, or Basic Saving Bank Deposit Accounts (BSBDAs), went up sharply from less than 10 crore in 2009 to around 45 crore by FY2015. The amount outstanding in the BSBDAs went up from less than Rs 7,500 crore to about Rs 50,000 crore during the period.

On 15 December, the NDA government had said 19.41 crore accounts were opened since the Pradhan Mantri Jan Dhan Yojana was announced by Prime Minister Narendra Modi on 15 August, 2014, up till 2 December, 2015.

The balance in these accounts stood at Rs 27,283 crore. Of the 19.41 crore bank accounts, 34% were zero-balance accounts.

The recommendations of the Committee on Medium-term Path on Financial Inclusion (CMPFI) — set up after Modi asked the RBI for specific targets to drive financial inclusion at the Reserve Bank Conference on Financial Inclusion held in April this year — were put up by the bank for comments from the public till 29 January, 2016.

The report can be read here