"One area where we are working and will probably see a lot of retail interest is inflation-indexed bonds. Hopefully, we will introduce it soon," RBI deputy governor HR Khan told a capital markets event organised by Ficci here this evening.

Khan said a joint group, which includes members from the RBI and the government, is working on this issue.

Talking about the rationale behind floating such bonds, Khan said this will work as an effective hedging strategy and people will shy away from gold as a hedging tool against inflation.

Both issuers and subscribers would benefit out of the inflation-indexed bonds, he said adding the central bank may incentivise banks and primary dealers for opening demat accounts for people wishing to invest in these bonds.

Talking about possible reduction of withholding tax on the rupee-denominated bonds, Khan said, "at present, the rupee-denominated infrastructure bond doesn't get the benefit (of 5 per cent withholding tax). So, there is a proposal that the same 5 per cent withholding tax should be applicable to the rupee-denominated infra bonds, which is high on the government agenda".

PTI