financial literacy in india essay

Essay on Financial Literacy for Students and Children

Importance of financial literacy, an introduction to financial literacy.

We go to schools, colleges, universities to complete our educated and start earning our livelihood. We take up jobs, practise professions or start our own businesses so that we can earn money to make our living. But which of these institutions make us capable of managing our own hard-earned money? Probably a very few of them. 

Our ability to effectively manage our money by drawing systematic budgets, paying off our debts, making buying and selling decisions and ultimately becoming financially self-sustainable is known as financial literacy. 

Financial literacy is knowing the basic financial management principles and applying them in our day-to-day life. 

Financial Literacy – What does it Involve? 

From simple practices like keeping a track of our expenses and understanding the need to spend money if we like a product to striking a balance between the value of time saved and money lost, paying our taxes and filing of tax returns, finalizing the property deals, etc – everything becomes a part of financial literacy. 

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As human beings, we are not expected to know the nitty-gritty of financial management. But managing our own money in a way that it does not affect us and our family in a negative way is important. We certainly do not want to end up having a day with no money at hand and hunger in our stomach. 

Why is Financial Literacy so Important?

Financial literacy can enable an individual to build up a budgetary guide to distinguish what he buys, what he spends, and what he owes. This subject additionally influences entrepreneurs, who incredibly add to financial development and strength of our economy. 

Financial literacy helps people in becoming independent and self-sufficient. It empowers you with basic knowledge of investment options, financial markets, capital budgeting, etc.

Understanding your money mitigates the danger of facing a fraud-like situation. A few strategies are anything but difficult to accept, particularly when they’re originating from somebody who is by all accounts learned and planned. Basic knowledge of financial literacy will help people with foreseeing the risks and argue/justify with anyone learned and well-informed.

What should you read on / get informed about in Financial Literacy?

• Budgeting and techniques of budgeting
• Direct and indirect taxation system
• Direct tax slabs
• Income and expense tracking 
• Loans and debt – EMI management 
• Interest rate systems: fixed versus floating
• Business and organisational transaction studies
• Elementary Book-keeping and Accountancy
• Cash in-flow and out-flow Statements
• Investment & personal finance management
• Asset management:
• Business negotiation skills and techniques
• Make or buy decision-making
• Financial markets 
• Capital structure – owner’s funds and borrowed funds
• Fundamentals of Risk Management
• Microeconomics and Macroeconomics fundamentals

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Executive Summary

Strengthening Financial Inclusion in the country has been one of the important developmental agendas of both the Government of India and the four Financial Sector Regulators (viz. RBI, SEBI, IRDAI and PFRDA). Financial literacy supports the pursuit of financial inclusion by empowering the customers to make informed choices leading to their financial well-being.

2. Subsequent to completion of the period of the first National Strategy for Financial Education (NSFE: 2013-2018), a review of the progress made was undertaken by the Technical Group on Financial Inclusion and Financial Literacy (TGFIFL- Chair: Deputy Governor, RBI) under the Financial Stability and Development Council (FSDC-Chair: Hon’ble Union Finance Minister). Based on the review of progress made under the Strategy and keeping in view the various developments that have taken place over the last 5 years 1 , notably the Pradhan Mantri Jan Dhan Yojana (PMJDY) 2 , the National Centre for Financial Education (NCFE) in consultation with the four Financial Sector Regulators and other relevant stakeholders has prepared the revised NSFE (2020-2025).

3. The NSFE document intends to support the Vision of the Government of India and Financial Sector Regulators by empowering various sections of the population to develop adequate knowledge, skills, attitude and behaviour which are needed to manage their money better and plan for their future. The Strategy recommends adoption of a Multi-Stakeholder Approach to achieve financial well-being of all Indians.

4. To achieve the vision of creating a financially aware and empowered India, the following Strategic Objectives have been laid down:

Inculcate financial literacy concepts among the various sections of the population through financial education to make it an important life skill

Encourage active savings behaviour

Encourage participation in financial markets to meet financial goals and objectives

Develop credit discipline and encourage availing credit from formal financial institutions as per requirement

Improve usage of digital financial services in a safe and secure manner

Manage risk at various life stages through relevant and suitable insurance cover

Plan for old age and retirement through coverage of suitable pension products

Knowledge about rights, duties and avenues for grievance redressal

Improve research and evaluation methods to assess progress in financial education

5. In order to achieve the Strategic Objectives laid down, the document recommends adoption of a ‘5 C’ approach for dissemination of financial education through emphasis on development of relevant Content (including Curriculum in schools, colleges and training establishments), developing Capacity among the intermediaries involved in providing financial services, leveraging on the positive effect of Community led model for financial literacy through appropriate Communication Strategy, and lastly, enhancing Collaboration among various stakeholders.

6. The recommendations laid down in the Strategy under each of the ‘5 Cs’ are as under:

Financial Literacy content for school children (including curriculum and co-scholastic), teachers, young adults, women, new entrants at workplace/entrepreneurs (MSMEs), senior citizens, persons with disabilities, illiterate people, etc.

Develop the capacity of various intermediaries who can be involved in providing financial literacy.

Develop a ‘Code of Conduct’ for financial education providers.

Evolve community led approaches for disseminating financial literacy in a sustainable manner.

Communication

Use technology, mass media channels and innovative ways of communication for dissemination of financial education messages.

Identify a specific period in the year to disseminate financial literacy messages on a large/ focused scale.

Leverage on Public Places with greater visibility (e.g. Bus Stands, Railway Stations, etc.) for meaningful dissemination of financial literacy messages.

Collaboration

Preparation of an Information Dashboard.

Integrate financial education content in school curriculum, various Professional and Vocational courses (undertaken by Ministry of Skill Development and Entrepreneurship (MSD&E) through their Sector Skilling Missions and the likes of B.Ed./M.Ed. programmes.

Integrate financial education dissemination as part of various on-going programmes.

Streamline efforts of other stakeholders for financial literacy.

The Strategy also suggests adoption of a robust ‘Monitoring and Evaluation Framework’ to assess the progress made under the Strategy.

Chapter 1: Introduction

1.1 The Organization for Economic Co-operation & Development (OECD) defines Financial Literacy and Financial Education. Financial Literacy is defined as a combination of financial awareness, knowledge, skills, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being (OECD, 2012). Financial Education , on the other hand is defined as the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help and to take other effective actions to improve their financial well-being” (OECD, 2005).

1.2 As can be seen, the term Financial Education and Financial Literacy are not the same, these are related concepts. People achieve Financial Literacy through the process of Financial Education. The achievement of Financial Literacy empowers the users to make sound financial decisions which result in financial well-being of the individual.

1.3 The financial service sector in India has undergone significant changes in the last 5 years and the sector has been ever widening. There is a need to increase the size of banking as well as other financial sectors to ensure that the benefits of these developments reach the common masses. Financial inclusion is a National priority of Government of India and the Financial Sector Regulators (RBI, SEBI, IRDAI and PFRDA) as it is an enabler for inclusive growth. In the Indian context, financial inclusion is the process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream institutional players. Financial inclusion provides an avenue to the poor for integrating with the formal financial system. While financial inclusion is essentially a supply-side intervention, financial education is a demand side intervention. Apart from these forces operating on the demand side and supply side, there are also other enabling factors on the ground. Achievement of financial well-being of citizens of any country depends on how well these factors and forces are integrated and the extent to which these work in cohesion.

1.4 Financial education plays a vital role in creating demand side response to the initiatives of the supply side interventions. Financial education initiatives by concerned stakeholders will help people achieve financial well-being by accessing appropriate financial products and services through regulated entities. These efforts will be guided by the National Strategy for Financial Education (NSFE). Incidentally, financial education also supports achievement of Sustainable Development Goal (SDG) No. 4 on Education which aims to ensure inclusive and equitable quality education and promote life-long learning opportunities for all (SDG Target 4.6 on Literacy and SDG Target 4.4 on Life Skills under SDG 4 on Education).

1.5 India has made tremendous progress in bringing its citizens into the formal financial system over the last many years. Since India’s first NSFE was released in 2013, there have been many developments in the financial inclusion scenario of the country. During this period, important financial inclusion initiatives by Government of India such as Pradhan Mantri Jan-Dhan Yojana (PMJDY), social security schemes viz. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY), Pradhan Mantri Kisan Maan Dhan Yojana (PM-KMY), Pradhan Mantri Shram Yogi Maan Dhan Yojana (PM-SYM) and Pradhan Mantri Mudra Yojana (PMMY) have changed the financial inclusion landscape. These initiatives are not only bringing the excluded sections into the financial mainstream but also ensuring access to various financial services such as Basic Savings Bank Deposit Account (BSBDA), need based credit, remittance facility, insurance and pension to the excluded sections.

1.6 The latest available World Bank’s Findex 2017 Report had brought out that the proportion of adults with a formal account in the country has risen from 35% in 2011, to 53% in 2014, to 80% in 2017. India has also made extraordinary progress in reducing the country’s gender gap in account ownership, from nearly 20% in 2014 to 6% in 2017 (World Bank Group, 2018). Much of this improvement can be attributed to the flagship initiative of the Government of India towards financial inclusion, namely the PMJDY 3 , supported by the conducive ecosystem created by the financial sector regulators. In order to take forward the benefits achieved through the financial inclusion efforts, financial literacy will have to play a central role in ensuring that people use appropriate formal financial services to ensure their financial well-being (Department of Financial Services, Ministry of Finance, Government of India, 2019).

Background and Rationale of NSFE

1.7 India has a large population of adults 4 . This demographic advantage can be leveraged to ensure that India becomes one of the fastest growing economies, with emphasis on inclusive growth through a vibrant and stable financial system. Since a large number of stakeholders, including the Central and State governments, Financial Sector Regulators, financial institutions, civil society, academia, educational institutions in public and private sector and others are involved in spreading financial literacy, a broad National Strategy for Financial Education (NSFE) is a pre-requisite to ensure that they work in tandem and their work is aligned to the overall Strategy on financial education and not at cross purposes. In recent years, it is increasingly being recognized that Nation-wide financial literacy can be achieved only through a multi-stakeholder approach wherein different stakeholders viz. Government, Financial Sector Regulators, Financial Service providers, civil society, academia (both in public and private sector), etc. have a role to play.

1.8 National Strategy for Financial Education is defined as “a nationally co-ordinated approach to financial education that consists of an adapted framework or programme” (OECD, 2019). The NSFE document intends to support the vision of the Government of India and Financial Sector Regulators by enabling various sections of the population to develop knowledge, skills, attitude and behaviour which are needed to manage their money better and to plan for their future. The document also takes stock of the current work done by various stakeholders and adopts a multi-stakeholder approach to achieve financial well-being of Indians.

1.9 Towards this objective, the National Centre for Financial Education (NCFE) has been set up by all the Financial Sector Regulators as a Section (8) company under Companies Act, 2013 to undertake basic financial education and to develop suitable content for increasing financial literacy among the masses in the country.

1.10 Over the last few years, there has been rapid progress towards digitalization which has brought newer opportunities to the forefront like never before. This Digital revolution has been supported by initiatives like Digital India Campaign, Digital Saksharta Abhiyan, etc. There is a paradigm shift in digital transactions and Payment Infrastructure in the country (Goal of Less Cash Economy). Due to all these developments, it has become imperative to revise the existing National Strategy for Financial Education (NSFE) and to adopt innovative measures to implement the same. The National Strategy for Financial Education (2020-2025) inter-alia focuses on advancement of skills of financial service providers and other intermediaries involved in dissemination of financial literacy.

1.11 It is envisaged that implementing the Strategy would go a long way in furthering financial literacy across the country and result in positive behavioural outcomes among the population emanating from the Strategic Objectives laid down in the document.

Chapter 2: Overview of Progress under 1st NSFE (2013-2018)

2.1 Since the launch of the first National Strategy for Financial Education (NSFE) in 2013, different stakeholders have undertaken several measures to improve financial literacy of the cross-section of population in the country. A snapshot of the initiatives undertaken by the various stakeholders is summarized in Annex. The key learnings from the programmes of financial literacy implemented during the 1st NSFE (2013-2018) are summarized below:

Target Specific Modules: A one size fits all approach for delivering financial literacy results in sub-optimal outcomes. Target specific modules need to be developed for effective dissemination of financial literacy messages.

Contextual & Vernacular Approach: The language and mode of delivery of financial literacy messages should be appealing to the target audience in an easy to understand manner. For example, Nukkad Natak (Street plays in local languages) was found to be an effective tool for delivering financial literacy.

Medium and Mode of Delivery: Multi-media modes like Audio-Visuals, Digital Vans (Digital financial literacy on wheels), Digital Display Systems, Kiosks, etc. have been found to be best tools for promoting digital financial literacy. Regarding mode of delivery, one-to-one learning and group trainings were found to be effective modes of dissemination of financial literacy messages.

Learning While Doing & Peer-to-Peer Learning: Learning is long lasting when accompanied by a hands-on effort/ demonstration besides repetitive relaying of messages. For example, practical training on usage of digital financial transaction using mobile vans (Digital Vans) etc.

Efficacy in Mass Media Outreach: Among mass media campaigns, messages broadcast through television had the highest recall among the audience as compared to other modes of broadcasting.

Rationalising Stakeholder Collaborations: Collaboration among all the stakeholders of financial education is important. For example, RBI is piloting the concept of Centre for Financial Literacy (CFL) which aims to leverage the strengths of banks and NGOs to explore innovative channels for delivery of financial literacy. Similarly, SEBI is undertaking investor education program in collaboration with Stock Exchanges and Depositories for delivery of financial literacy.

Use of Relatable Examples: Financial literacy messages when co-related with real life events (e.g. marriage, parenting, retirement planning, asset acquisition) seem to have higher connect to various target audiences.

Creating Positive Behavioral Outcomes: More efforts are needed to understand how financial education programmes can be curated to translate into positive behavioral outcomes.

Expanding the Digital Base: Given the rapid pace of progress made in digital financial services, focused efforts are needed to strengthen knowledge on safe digital financial practices.

The key learnings, as detailed above, have been incorporated in the Strategic Objectives ( Chapter 4 ), Policy Design ( Chapter 5 ), and Action Plan ( Chapter 6 ).

Chapter 3: Assessment of the Needs and Critical Gaps

3.1 To prepare a comprehensive Strategy based on people’s needs and the country’s available resources, the following process has been adopted in the Indian context:

Assessing and evaluating gaps in financial literacy.

Comparison of NSFE with the OECD-INFE Policy Handbook on National Strategies for Financial Education

A. Assessment and Evaluation of Critical Gaps in Financial Literacy

3.2 NCFE has carried out an All India Financial Inclusion and Financial Literacy Survey in 2019 with the help of an external surveying agency to find out the status of financial literacy in India. It may be mentioned that a similar Survey was undertaken in 2013 on the lines of OECD-INFE toolkit. A sample of 75000 adults aged 18 to 79 were interviewed in 14 national/regional languages using a set of household questionnaire. A multi-stage sampling technique has been adopted for selection of districts, block/wards, villages, households, respondents during the Survey.

3.3 The Survey conducted in 2019 revealed that 27.18% of the respondents have achieved minimum target score/minimum threshold score in each of the components of financial literacy prescribed by OECD-INFE [i.e. a minimum of 3 in Financial Attitude (out of 5), 6 in Financial Behaviour (out of 9) and 6 in Financial Knowledge (out of 9)] as compared to 20% in 2013.

3.4 Some of the major findings of the Survey are illustrated in the charts below:

3.5 Based on the above illustrative Charts, the following thrust areas have been arrived at for improving financial education efforts:

Though there has been an improvement over the period, further efforts are needed to improve financial literacy among women

East, Central and North Zone need more attention 5

Rural India needs focused attention

The group with lower education needs greater financial education initiatives

The group of age ‘50 and above’ needs more financial education

B. Comparison of NSFE with the OECD-INFE Policy Handbook on National Strategies for Financial Education

3.6 The OECD-INFE Policy Handbook on National Strategies for Financial Education (OECD, 2015) lays down important broad guidelines for Nations to develop their National Strategies for Financial Education. Based on the Handbook, the following steps have been undertaken by adopting them in the Indian context to develop the country’s Strategy:

I. Identification of Policy Priorities of the National Strategy through the Tools of Assessment

a) Mapping exercise of existing initiatives: Keeping in view the developments over the last five years since the launch of the first National Strategy for Financial Education (2013-2018) and the emerging aspirations of the country, NCFE had undertaken a mapping exercise of existing initiatives through consultation with Department of Financial Services, Ministry of Finance, Government of India; Financial Sector Regulators; Banks; Development Financial Institutions; Indian Banks’ Association; Self-Regulatory Organizations (SROs) (FIDC, M-Fin and Sa-Dhan); and other stakeholders (such as NPCI). The key initiatives taken by NCFE, the Financial Sector Regulators, Development Financial Institutions, NPCI, etc. are summarized in Annex. The key learnings from these initiatives along with a study of global best practices on financial education have been used in formulating the strategic objectives and developing the action plans.

b) Measurement of Level of Financial Literacy and Inclusion through Nation-wide Survey: A Pan India Financial Inclusion and Financial Literacy Survey in line with the standards prescribed by OECD-INFE toolkit was undertaken in 2013-2014 to assess the level of financial literacy in the country. Subsequent to the completion of the period of the 1st NSFE, a survey has been undertaken in 2019 to empirically review the progress made during the last five years (2013-2018).

II. Establishing Institutional and Governing Arrangements

Keeping in view the existing institutional arrangement for guiding, monitoring and evaluating the Strategy, a well-defined institutional arrangement has been developed and laid down in Chapter 6 .

III. Evaluation Plan of National Strategy for Financial Education

A standardized method to monitor and evaluate the progress made by various stakeholders under the period of the Strategy has been laid down in Chapter 7 .

Chapter 4: Vision and Strategic Objectives of NSFE (2020-2025)

4.1 As mentioned in the document titled - Advancing National Strategies for Financial Education, (jointly published by OECD and Russia’s G20 Presidency in 2003), it is essential to establish clear financial education mandates, objectives and resources to be deployed by relevant public institutions for advancing National Strategy for Financial Education.

4.2 This Strategy document has been developed as a revised version of its precursor, NSFE (2013-2018) by including data-driven findings, new policy measures, evaluation tools, interventions and technological improvements. Since this Strategy is a revision of the earlier Strategy, it has been decided to retain the Vision and merge the Mission with the following Strategic Objectives.

Vision – A financially aware and empowered India

4.3 As there have been several developments in the financial inclusion landscape and the economy, in general, the Strategic Objectives have been revised to reflect the changes in the vast economic landscape and provide renewed impetus to promote financial education in the vast expanse of the diverse country.

The Strategic Objectives are as under:

4.4 Keeping in view the importance of granularity and our learning that a one-size-fits-all approach to financial education does not yield the desired results, the Strategic Objectives are envisaged to be achieved through the following dimensions:

4.5 A ‘5 C’ approach would be adopted for dissemination of financial education through emphasis on development of relevant Content (including Curriculum in schools, colleges and training establishments), developing Capacity among the intermediaries involved in providing financial services, leveraging on the positive effect of Community led model for financial literacy through appropriate Communication Strategy, and lastly, enhancing Collaboration among various stakeholders.

Chapter 5: Policy Design

5.1 Components of Financial Education

5.1.1 Basic Financial Education

The basic financial education consists of fundamental tenets of financial well-being 6 . With the introduction of Government’s PMJDY scheme along with APY, PMJJBY & PMSBY besides MUDRA Yojana, many people have already been included. They also require financial education so that they can take full benefits from these schemes. These basic concepts need to be communicated to everyone by adopting different modes of delivery, suitable to the target audience. Special emphasis shall be laid on the financially excluded and those newly included but not operating their accounts. The basic financial education acts as a foundation for sector-specific and process education.

5.1.2 Sector Specific Financial Education

Sector specific financial education is being imparted by the Financial Sector Regulators and focuses on “What” of the financial services and the contents cover awareness on ‘Dos & Don’ts’, ‘Rights & Responsibilities’, ‘Safe usage of digital financial services’ and approaching ‘Grievance Redressal’ Authority.

Basic and Sector specific education will empower a person to be more prudent and make informed decisions while choosing appropriate financial products as per his/ her requirements from the available alternatives.

5.1.3 Process Education

Process education is crucial to ensure that the knowledge translates into behavior. As an illustration, some of the aspects to be covered include:

• How to use an ATM card?
• How to do an UPI Transaction?

How to deposit money with a BC?

How to fill a loan application form?

How to compare and select an appropriate loan product?

How to purchase an insurance cover?

How to do various transactions in securities markets?

How to allocate funds in a pension plan?

How to lodge a complaint with the financial service provider?

How to approach an Ombudsman/Grievance Redressal Authority, etc.

These contents are to be developed in the form of easy to understand Audio/ Video, Animated Posters to help the consumers understand the processes to be adopted for various transactions. (For example, a short video on how to use the ATM displayed in the ATM machine would be helpful for a customer to avail the service)

5.2 Delivery Channels for Financial Education

Besides the already existing delivery channels for disseminating financial education messages, newer modes of delivery channels such as social media platforms, community radios, technology kiosks, chatbots etc. shall be effectively deployed.

Chapter 6: Action Plan to Achieve the Strategic Objectives

6.1 The 5-Core Actions / 5-C Approach shall be adopted through emphasis on development of relevant Content , developing Capacity of the various intermediaries involved in providing financial services, leveraging on the facilitating role of Community led model for financial literacy through appropriate Communication strategy by enhancing Collaboration among various stakeholders. A brief about each of the following core actions is given below.

6.1.1 Content

• Financial Literacy content for school children (including curriculum and co-scholastic), teachers, young adults, women, new entrants at workplace/ entrepreneurs (MSMEs), senior citizens, persons with disabilities, illiterate people, etc

6.1.2 Capacity

Develop the capacity of various intermediaries who can be involved in providing financial literacy

Develop a ‘Code of Conduct’ for financial education providers

6.1.3 Community

• Evolve community led approaches for disseminating financial literacy in a sustainable manner

6.1.4 Communication

Use technology, mass media channels and innovative ways of communication for dissemination of financial education messages

Identify a specific period in the year to disseminate financial literacy messages on a large scale

• Leverage on Public Places with greater visibility (e.g. Bus Stands, Railway Stations, etc.) for meaningful dissemination of financial literacy messages

6.1.5 Collaboration

Preparation of an Information Dashboard

Integrate financial education content in school curriculum, various Professional and Vocational courses (undertaken by Ministry of Skill Development and Entrepreneurship (MSD&E) through their Sector Skilling Missions and the like of B.Ed./M.Ed. programmes)

Integrate financial education dissemination as part of various on-going programmes

Streamline efforts of other stakeholders for financial literacy

6.2 The Strategic Goals along with detailed implementation plan and milestones are detailed in the following pages.

Action Plan for NSFE (2020-2025)

The intervention of Department of Financial Services (DFS), Ministry of Finance, Government of India would be sought for implementation of the above Action Plans, as and when necessary.

6.3 In line with the previous Strategy, the entire National Strategy for Financial Education (2020-2025) is sought to be implemented through the institutional mechanism, as illustrated above. Besides the oversight of the FSDC (Chair: Hon’ble Union Finance Minister), the implementation of the Strategy would be directly monitored by the Technical Group on Financial Inclusion and Financial Literacy (TGFIFL) (Chair: Deputy Governor, RBI).

6.4 Since the implementation of the National Strategy for Financial Education would entail large allocation and deployment of financial resources and manpower, adequate planning needs to be done at the Apex as well as at the level of Sector Specific Financial Regulators to ensure smooth implementation. All the Financial Sector Regulators, their respective Regulated Entities and other stakeholders should make necessary provisions for the same.

6.5 Identification of Key Stakeholders in the National Strategy: The following stakeholders have been identified for implementation of the strategic goals. The list is illustrative and not exhaustive.

Government of India: Department of Financial Services (Ministry of Finance), Ministry of Electronics and Information Technology, Ministry of Rural Development/ National Rural Livelihood Mission, Ministry of Urban Affairs and Poverty Alleviation/ National Urban Livelihood Mission, Ministry of Human Resources Development, Ministry of Corporate Affairs, Ministry of Skill Development and Entrepreneurship, Ministry of Health and Family Welfare, Ministry of Women and Child Development, Ministry of Information and Broadcasting, Ministry of Panchayati Raj, Ministry of Social Justice and Empowerment

Financial Sector Regulators: RBI, SEBI, IRDAI and PFRDA

National Centre for Financial Education (NCFE)

Development Financial Institutions: NABARD and SIDBI

Industry Associations: IBA, AMFI, FEDAI, BCFI

Securities Market Institutions Infrastructure: Stock Exchanges, Depositories

Payment Institutions: NPCI

Investor Education Institutions: IEPFA, IICA, etc

Financial Service Providers: Banks, Insurance Companies, Mutual Fund Companies, Pension Funds, Stock Exchanges and Depositories, Non-Banking Financial Companies, Fin-tech companies, etc

Self-Regulatory Organizations (SROs): FIDC, M-Fin, Sa-Dhan, etc

State Rural Livelihood Mission (SRLM) of all states

NGOs/ Civil Society Organizations

Research Institutions

Consumer Associations

Multi-Lateral Institutions (OECD-INFE, G20, etc.): For knowledge sharing on Global Best Practices

Chapter 7: Monitoring and Evaluation

7.1 It is well known that any Strategy is as good as its implementation. Keeping in view the vast and rapid changes taking place in the financial sector, all the stakeholders need to appreciate the dynamic nature of evolution of financial services and the concomitant changes that are required towards financial literacy. Having in place, a robust and scientific assessment method, would go a long way in helping Policy makers identify priorities and assess the impact of their interventions.

7.2 Some of the broad issues that need to be considered in this regard are as under:

National Strategy evaluation will include an assessment of the governance, co-ordination and monitoring mechanisms of the implementation methods, the role of stakeholders and the effects of any communication or publicity plans/ initiatives.

Each stakeholder needs to clearly plan and articulate their role in the design, development and implementation of the Strategy which shall be monitored through qualitative and quantitative indicators.

A scientifically designed template for gathering feedback through various channels, from both the beneficiaries of financial literacy programmes and the intermediaries involved in disseminating the same, needs to be prepared and periodically reviewed keeping in view the vast changes in the financial sector.

Selection of appropriate evaluation methods need to be finalized in view of the challenges involved in evaluation.

7.3 The OECD-INFE Issue Note on the Evaluation of National Strategies for Financial Education suggests that evaluation of National Strategy is essential from an accountability perspective, to provide valuable evidence to improve financial education policies and contribute to their sustainability, on the long term besides being a powerful source of evidence for the impact on the financial literacy and financial behaviour of citizens. The document also distinguishes between monitoring (A process of regular tracking of the implementation process) and Evaluation (The comprehensive process of understanding how the National Strategy has advanced towards its objectives) (OECD, 2019).

Monitoring Mechanism

7.4 The Technical Group on Financial Inclusion and Financial Literacy (TGFIFL)(Chair: DG, RBI) shall be responsible for periodic monitoring and implementation of National Strategy for Financial Education. There would be periodic monitoring of the activities undertaken by various stakeholders for dissemination of basic, sector specific and process literacy. A Digital Repository to collect information on various financial literacy activities undertaken by the stakeholders shall be prepared. To begin with, the Digital Repository can collect data of NCFE’s financial literacy initiatives, the Financial Sector Regulators and over time, gather data from Development Financial Institutions (NABARD and SIDBI), financial service providers and other stakeholders. Based on analyses and feedback from the participants, this Digital Repository would help in identifying those areas/geographies where more financial education interventions would be needed and at the same time, prevent duplication of efforts by stakeholders.

Evaluation Mechanism

7.5 Evaluation of the Strategy refers to a process that is seeking to assess if, and How, the National Strategy is adding value, Whether it is meeting its objectives and What impact it is having on the stated aims (OECD, 2019). Proper evaluation provides feedback as to whether the Strategy is leading to a change that is desirable and a change which would not have occurred, otherwise. The OECD-INFE Issue Note on the Evaluation of National Strategies for Financial Education Monitoring highlights the importance of integrating the evaluation process in the Strategy document and ensuring that the co-ordinators actively engage with evaluation across short-term, medium-term and long-term time horizon and using the data collected through monitoring process and undertaking analysis of the same.

7.6 Keeping this in view, a Mid-term Evaluation shall be undertaken at the end of three years of Strategy implementation (2022-2023). A comprehensive National Survey at the end of the Strategy implementation period shall be undertaken in 2025.

1. (2003). Advancing National Strategies for Financial Education. OECD and Russia’s G20 Presidency joint publication.

2. Department of Financial Services, Ministry of Finance, Government of India. (2019, October 24). Progress Report-PMJDY. Retrieved from Pradhan Mantri Jan Dhan Yojana: https://www.pmjdy.gov.in/account

3. NCFE-NISM. (2013). Financial Literacy and Inclusion in India - Final Survey Report 2013. Mumbai: NCFE-NISM.

4. OECD. (2005). Improving Financial Literacy: Analysis of Issues and Policies, OECD Publishing.

5. OECD. (2005). Recommendation of Principles and Good Practices for Financial Education and Awareness. Paris: OECD.

6. OECD. (2012). High-level Principles on National Strategy for Financial Education.

7. OECD. (2015). National Strategies for Financial Education-OECD/INFE Policy Handbook. Paris: OECD.

8. OECD. (2016). OECD/INFE International Survey of adult financial literacy competencies. Paris: OECD.

9. OECD. (2019). Evaluation of National Strategies for Financial Education. Paris: OECD-INFE.

10. Rangarajan, D. C. (2008). Committee on Financial Inclusion. Mumbai: RBI.

11. World Bank Group. (2018). The Global Findex Database. Washington DC: International Bank for Reconstruction and Development/The World Bank.

Annex - Financial Literacy Initiatives by Stakeholders

NCFE creates financial awareness and empowerment through financial education campaigns across the country for all sections of the population through seminars, workshops, conclaves, trainings, programs, campaigns, discussion forums by itself or with help of institutions, organizations and provide training in financial education. It creates workbooks, worksheets, literature, pamphlets, booklets, fliers, technical aids. NCFE prepares appropriate financial literature for target-based audience on financial markets and financial digital modes for improving financial literacy so as to improve their knowledge, understanding, skills and competence in finance.

Basic Financial Education: NCFE is conducting financial education campaign through financial education programs like MSSP (for schools), Financial Education Training Programme (FETP) for school teachers, FACT (for undergraduate and postgraduate students) and FEPA (financial education program for adults).

Money Smart School Program (MSSP) is an academic year program where schools voluntarily implement financial education as part of school curriculum.

NCFE–National Financial Literacy Assessment Test (NFLAT) is a first kind of national level test, conducted by the NCFE, to measure the level of financial literacy among school students.

FETP is an initiative for providing unbiased personal financial education training to school teachers to facilitate inclusion of financial education in school curriculum. With the success of NFLAT, there was a requirement to train the school teachers in the areas of financial education so that they in turn can conduct classes and help school students acquire basic financial literacy skills.

FACT (Financial Awareness and Consumer Training) is a program by NCFE to provide financial education to young graduates and postgraduates, on topics relevant to them, which will positively impact their financial wellbeing.

Financial Education Program for Adults (FEPA) is a new initiative started by NCFE. FEPA is aimed at providing basic financial education to the adult section of under-served areas of India, especially rural India.

Basic Financial Education: RBI has prescribed the following content for basic financial education:

Financial Literacy guide, Financial Diary and set of 16 posters prepared by RBI

Special camps booklet prepared by NCFE for people newly inducted into the financial system which captures the fundamental tenets of financial wellbeing such as savings, borrowings, concept of interest and compounding, time value of money, inflation, relation between risk and rewards etc.

Sector Focused Financial Education: The content covers relevant topics in the banking sector such as ATMs, payment systems such as NEFT, UPI, USSD, awareness about sachet portal, keeping away from Ponzi schemes, fictitious emails/calls, KYC, Exercising Credit Discipline, Business Correspondents etc. A Financial Awareness Messages (FAME) booklet comprising of 20 messages for the general public and five Posters on financial literacy for the Financial Literacy Week have been made available on the Financial Education webpage of RBI’s website.

Public Awareness Campaign

Important press releases, statements, regulatory guidelines, speeches, clarifications and events are tweeted on RBI’s twitter handle ‘@RBI’ and videos are relayed on RBI’s YouTube link. A separate Twitter handle ‘@RBI says’ and Facebook page ‘RBI Says’ publish messages and information of interest for greater awareness and understanding of the Bank’s functions. Reserve Bank of India envisages limited two-way communication and engagement over social media and monitors its social media presence.

Over the years, RBI is constantly reaching out to the common man through outreach programmes, financial literacy initiatives, space in mass media and social media platforms, etc. Reserve Bank of India also empowers the members of public by informing them about facilities and services to expect from banks and financial institutions through ‘Public awareness campaign’ which aims to educate the members of public regarding their rights and responsibilities in banking related matters. The campaigns are done on a regular basis in newspaper, TV, Radio, Cinema, Digital channels, SMS and hoardings, under the tagline 'RBI Kehta Hai'.

For the video spots, at present, some cricketers and badminton players who are employees of the Reserve Bank of India and also are a part of various IPL/PBL teams have been roped in. The stories in these video spots work at many levels. Apart from the main message, the story line also builds an immediate emotional connect with the audience and the conversational script helps keep human interest alive in a dry subject like nitty gritty of a bank account.

The public awareness campaign of the Reserve Bank of India started in 2017 and gathered steam in 2018. Advertisements on Basic Savings Bank Deposit Account (BSBDA), Safe Digital Banking, Limited Liability and Ease of Banking for Senior Citizens were released in popular events such as the Indian Premier League (IPL), the 2018 FIFA World Cup, Asian Games, Kaun Banega Crorepati (KBC), Pro Kabbadi League, Pro Badminton League and India-New Zealand One Day International.

A film on BSBDAs explains how opening of this account obviates the requirement of minimum balance. A film on Safe Digital Banking cautions the public about sharing card and PIN details while carrying out digital transactions. Another film on Limited Liability explains the recourse available in the event of card fraud. A film on ‘Ease of Banking for Senior Citizens’ elucidates facilities like doorstep banking available for senior citizens. These films, using cricketers and badminton players, who are employees of the Reserve Bank of India, were widely disseminated in media advertisements.

A unique feature of the public awareness campaign is the missed call element: upon giving a missed call to the number 14440, the caller will receive information through a pre-recorded Interactive Voice Response System (IVRS), avoiding the miscommunication or over-communication of a call centre approach. In the non-Hindi speaking regions, mobile phone subscribers receive messages in English and regional languages, so that the connect with common person is immediate and all encompassing.

Basic Financial Education: SEBI has undertaken the following initiatives for basic financial education:

Financial Education through Resource Persons Program to impart financial education to public. The eligible individuals trained and empanelled as RPs (in districts) by SEBI who can conduct free workshops in local language and are paid honorarium. The basic concepts of finance, banking, insurance, pension and investments are covered across five Target groups (viz. Home Makers, Self-Help groups, Executives, Middle Income Groups, Retired personnel). During the workshops, free financial education booklets are distributed

Visit to SEBI by students

• Financial Education Booklet covering basics of concepts like Financial planning, Savings, Investment, Insurance, Pension, Borrowing, Tax saving, caution against Ponzi schemes, Grievance redressal, etc

Sector Specific Financial Education: SEBI has the following initiatives for sector focused financial education:

Investor awareness programs by SEBI recognized Investors’ Associations

Regional Seminars in association with Exchanges/Depositories

Commodity awareness programs by SEBI recognized Commodity Derivatives Trainers

In addition to the above, SEBI has also undertaken the following initiatives:

• Participation in World Investor Week in association with International Organization of Securities Commissions (IOSCO): With the objective of highlighting the initiatives taken by various financial market regulators in the direction of conducting investor protection and education awareness activities, IOSCO has been organizing every year a weeklong global campaign referred to as World Investor Week (WIW). SEBI participated in IOSCO WIW by organising various financial literacy and investor awareness programmes during this week across the country.

• Dedicated Investor Website: A dedicated website http://investor.sebi.gov.in is maintained for the benefit of investors. The website provides relevant educational/awareness material and other useful information. Further, schedules of various investor and financial education programmes are also displayed on the website for the information of investors.

• Mass Media Campaign: In order to reach out to people, SEBI has embarked on a mass media campaign giving relevant messages to investors through popular media. Since year 2012, SEBI has carried out various awareness campaigns in multi mass media (TV/Radio/Print/bulk SMS) on topics as mentioned below:

Investor grievance redressal mechanism

Collective Investment Scheme - Unrealistic returns.

Collective Investment Scheme – Don’t Go by Hearsay.

Application Supported by Blocked amount (ASBA) - Initial Public Offering (IPO).

Dabba Trading

• Caution against Hot Tips

Additionally, posters on cautionary messages listed above were printed in various languages and distributed to district collectors, panchayat offices, etc. in various languages.

• Investor Grievance Redressal: SEBI has been taking various regulatory measures to expedite the redressal of investors grievances. The grievances lodged by investors are taken up with the respective listed company or intermediary and continuously monitored. SEBI Complaints Redressal System (SCORES) has helped the investors in real time knowledge of status of their grievances since investors can log onto SCORES at any time and from anywhere and check the status of the grievances with the help of user-name and password provided to them at the time of lodging grievances.

• SEBI Toll Free Helpline: SEBI had launched toll free helpline service numbers 1800 22 7575/1800 266 7575 on December 30, 2011. The helpline service is available every day from 9:00 a.m. to 6:00 p.m. (except on declared public holidays in Maharashtra) to investors from all over India. The helpline service is available in English, Hindi and various regional languages.

Since its inception, IRDAI has taken various initiatives in the area of financial literacy. Awareness programmes have been conducted on television and radio and simple messages about the rights and duties of policyholders, channels available for dispute redressal etc. have been disseminated through television and radio as well as the print media through sustained campaigns in English, Hindi and 11 other Indian languages.

IRDAI has got a pan India survey on awareness levels about insurance carried out through the NCAER in a bid to improve on its strategy of creating insurance awareness. A post launch survey was also done to gauge the efficacy of the campaigns of IRDAI in increasing insurance penetration and awareness. IRDAI has also brought out publications of ‘Policyholder Handbooks’ as well as a comic book series on insurance. A dedicated website for consumer education in insurance was launched to reach out to the policyholders more effectively. IRDAI’s Integrated Grievance Management System (IGMS) creates a central repository of grievances across the country and provides for various analyses of data indicative of areas of concern to the insurance policyholder.

Some of the major initiatives carried out by IRDAI are listed below:

Conducting seminars, awareness campaigns, Metro Rail campaigns, quizzes, etc.

‘Young Corner’- an interactive six game featurette was launched on the Policyholders website. A Hindi version of the website was also launched to increase its reach

Print campaign cautioning the general public about the spurious callers and fictitious offers was launched. Insurance comic books in 12 vernacular languages were released

Handbooks on Insurance such as Employment opportunities in Insurance for students; Crop Insurance, right buying etc., were launched

Pan-India campaign against spurious callers through TV Commercials and Radio jingles on the utility and benefits of various forms of insurance in five regional languages

PFRDA has launched a dedicated website called “Pension Sanchay” in 2018. Through this website, PFRDA aims towards addressing the need of financial literacy from the perspective of retirement planning. The content of the website has been designed keeping into view the four most important concepts in financial decision making-knowledge of interest rates, interest compounding, inflation and risk diversification. The website has separate blog segment where blogs written by the professionals in the financial sectors and the officers of the Authority are made available which provides meaningful insight regarding the fundamentals of finance, banking and investments.

PFRDA conducts subscriber awareness programs through its central record keeping agencies at different places across India. Further, PFRDA also has empaneled a dedicated training agency for creating subscriber awareness and capacity building regarding the NPS and APY. In addition to the above, PFRDA also conducts Annuity Literacy Program in co-ordination with NPS Trust and Annuity Service Providers for making subscribers aware about the different annuities available to them.

Creation of financial awareness amongst the rural masses through various media in Hindi, English and vernacular languages. (Printed materials such as leaflets, posters, books/booklets on financial literacy initiatives; jingles related to financial inclusion eg. opening of bank accounts, SHG savings, Swarojgar Credit Cards, etc., were aired and animated films on loans, budgeting and usage of ATMs hosted on our website as well as YouTube channel)

Conduct of Financial Literacy Awareness Programmes (FLAPs) targeted for people who are newly inducted in the financial system, Adults, Farmers, School Children, Senior Citizens, SHGs and Entrepreneurs besides financial education for rural masses on different modes of digital payments.

Conduct of FLAPs with Mobile Demo Vans fitted with Audio-Video equipment, ATM, Micro-ATM and handholding for conducting digital transactions (new point)

Capacity building initiatives to sensitize and train the staff of commercial banks, RRBs and RCBs for effective delivery of financial literacy through BIRD Setting up of financial literacy centres by Regional Rural Banks (RRBs) and Rural Cooperative Banks (RCBs) besides deployment of mobile demonstration vans fitted with ATMs and / or Micro-ATMs

Extended support to Rural Self Employment Training Institutes (RSETIs)/ Rural Development & Self Employment Training Institute (RUDSETI) to acquire training equipment for livelihood training.

Capacity building initiatives to sensitize and train the staff of the commercial banks, RRBs and RCBs for effective delivery of financial literacy.

Training for BC/BFs of banks and reimbursement of examination fees

NABARD has advised banks (scheduled commercial banks, RCBs, RRBs) to draw up state-wise quarterly plans for support from FIF towards financial and digital literacy camps by their branches and FLCs. These plans would have to cover target groups such as SHGs, students; senior citizen; farmers; small entrepreneurs etc. giving special attention to excluded blocks, areas based on FIPs of Banks and discussions in SLBC Sub Committee on FI and State Government priorities. NABARD RO would also be holding quarterly review with banks for projects funded out of FIF and the progress would also be reviewed in FI Sub Committee of SLBCs.

Samriddhi, the virtual assistant was launched by SIDBI on the Udyami Mitra portal on April 02, 2018. The virtual assistant guides budding entrepreneurs across a wide gamut of topics ranging from kinds of loans to handholding support. (operational in English and Hindi)

A “Bankability Kit for MSE Entrepreneurs” in bilingual format has been hosted on the portal. This is a one stop guide for entrepreneurs to assess themselves, give an overview of what bankers look at, tips to communicate with banks, financial products for MSMEs, besides other important components.

Certified Credit Counsellors and CCIs have been empaneled and onboarded on Udyami Mitra platform to strengthen the supply side by enhancing access to credit as also giving thrust to demand side issues of MSMEs particularly those at the bottom of pyramid.

Udyami Mitra Portal aims to aims at instilling ease of access to MSMEs financial and non-financial service needs. The portal also hosts 325 project profiles covering 40 industrial sectors for reference purpose. More than 7618 handholding agencies have attended to 50680 information and other important needs of aspirant entrepreneurs. Certified Credit Counsellors are also assisting entrepreneurs in enhancing their knowledge and connect them appropriately to lenders.

SIDBI with the support of the nationwide Common Service Centres (CSCs) has delivered an Entrepreneurship Awareness campaign or the Udyam Abhilasha project which focused on 115 aspirational districts across 28 states. These 115 districts account for more than 20% of the country’s population and cover over 8,600 Gram panchayats. During the campaign around 470 training locations were covered with over 2.25 lakh hours of inputs given to 18000+ youths (including about 35% women)

SIDBI has positioned Hauz Khas Metro Station (in New Delhi) as a thematic station and disseminating information amongst masses. This initiative aims at connecting people with initiatives like Pradhan Mantri Mudra Yojana, CGTMSE, Social Security schemes, SIDBI offerings, GOI initiatives, etc.

During the recent Kumbh Mela, SIDBI initiated a special project by setting up a Swavalamban stall and created financial awareness aimed at spreading entrepreneurship culture across the nation through games (Kaun Banega Udyami), Nukkad Natak/ puppet shows, financial literacy videos and disseminated information on schemes such as MUDRA, CGTMSE, Standup India and so on.

NPCI started working with Public Sector Banks (PSUs) and private sector banks to create awareness and literacy sessions on RuPay, IMPS, AePS, and USSD - *99#. NPCI was involved with cooperative and regional rural banks. While conducting awareness and literacy sessions NPCI also distributed posters, ATM screen, web banners, SMS, emailers, etc. for digital payment literacy and fraud awareness.

Disseminating digital payment literacy to corporate employees and beneficiaries with the help of these agencies. Currently, apart from the banks NPCI is also associated with Indian Railways, OMCs, NABARD, Education Institutes, Corporate CSR, NULM, MFIs, BCs, NGOs, Agritechs, FinTechs, etc to promote digital payment literacy and awareness.

• Entered Limca Book of Records in the year 2017 for conducting 120 e-Payment Literacy camps simultaneously across the country on September 8, 2015, the world Literacy Day. 23,930 customers attended workshops.

1 Increased penetration of mobile phones, retail digital transactions, growing adult population in the country, entry of Payments and Small Finance Banks, Fin-Tech players and awareness on the need to manage one’s finances.

2 PMJDY also known as the National Mission for Financial Inclusion, was launched by Hon’ble Prime Minister of India in August 2014. For further details please see explanation for Foot note No. 3 in page 6 ( Chapter-01 ).

3 Pradhan Mantri Jan Dhan Yojana (PMJDY) launched in August 2014 is a National Mission on Financial Inclusion encompassing an integrated approach to bring about comprehensive financial inclusion of all the households in the country. The plan envisaged universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility. The plan also envisages channelling all Government benefits (from Centre / State / Local Body) to the beneficiaries’ accounts and pushing the Direct Benefits Transfer (DBT) scheme of the Union Government. Subsequently, the Government decided to continue National Mission for Financial Inclusion (PMJDY) beyond August 2018 with focus of opening account from every household to every adult. So far 37.70 Crore bank account have been opened under PMJDY (as on December 18, 2019). For more details see http://www.pmjdy.gov.in/

4 The population of India is 1,370,862,591 as of October 29, 2019, based on Worldometers elaboration of the latest United Nations data. The age group (15-64) constitutes 67.27% of the total population and the median age is 27.1 ( https://www.worldometers.info/world-population/india-population/ )

5 In the survey undertaken in 2013, North East Zone was subsumed under East Zone. Hence the data for North East between 2013 and 2019 may not be comparable.

6 The concepts include: (a) importance and advantages of savings, (b) staying out of unproductive loans, (c) borrowing from formal financial sector as per need and capacity, (d) interest rate and the power of compounding, (e) time value of money, (f) inflation, (g) the need to insure, (h) the need to plan for old age income, (i) role of major financial sector related institutions such as Ministries, Financial Sector Regulators, banks, stock exchanges and insurance companies and (j) basic concept regarding relation between risks versus returns, (k) grievance redressal.

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India’s growing financial literacy

• Jan 27, 2022, 14:00

Introduction

Financial literacy is the ability to effectively manage a variety of financial skills, such as personal finance management, budgeting, and investing. Financial investments and services have recently become widespread among people of all economic backgrounds.

India’s financial literacy rate among its young and adult population has been growing due to various factors including the recent advancement in technology and media coverage. The government of India and various regulators are constantly working towards growth by implementing financial literacy courses, workshops and schemes. From mobile banking to online payments and insurance; the country has a huge number of online financial services users. This helped improve India’s financial literacy as the awareness and ease of insurance and banking increased. Number of transactions with respect to digital payments in India grew 5x from 1,004 crores (10.04 billion) in 2016-17 to 5,554 crores (55.54 billion) in 2020-21. Furthermore, the value of fintech transactions is expected to rise at a CAGR of 20% to US$ 138 billion in 2023 from US$ 66 billion in 2019.

    Source: National Centre for Financial Education report, 2015 & Financial Literacy and Inclusion in India Survey Report, 2019

Importance of Financial Literacy in India

Financial literacy is one of the biggest assets of any country as it is directly proportional to the economic growth. The significance of financial literacy in India are as follow:

• Development of rural areas : Reaching out to rural sections and working on their development can be achieved through financial literacy. This can be achieved by making people more aware about the available resources and right way of utilizing them.
• Ease in borrowing : Based on an RBI study, 42.9% of population borrowed money from informal sources and pay higher interests. A strong financial education can help small traders make informed decisions and make the best use of available resources.
• Ease in doing business transactions : The launch of Pradhan Mantri Jan Dhan Yojana has led to an addition of 280 million new bank accounts. These accounts have led to an ease in doing business and has also promoted cashless transactions to a great extent.
• Growth of MSMEs : MSMEs contribute to 29% of India’s GDP with 50% of the exports coming from this sector. Financial literacy can help small businesses grow and even bring new businesses to the market.

Surge in equity market investors

Retail participation in the Indian stock market has increased dramatically over the last two years, as more first-time investors have shifted their focus from traditional means of investing and entered the stock market in search of higher returns. The pandemic-caused lockdown and subsequent work-from-home with high internet penetration fueled their enthusiasm even more. Between April and November 2021, the two depositories, Central Depository Services (CDSL) and National Securities Depository (NSDL) added 28.6 million new accounts.

Source: Business Standard

Impact of social media on financial literacy

Social media has a huge impact in spreading financial literacy in India. It was one of the biggest influencers of rise in investment during the pandemic. Many stock market training academies, YouTube channels and websites were founded during this period. The top 15 Indian YouTube channel focusing on equity markets have a subscriber base of more than 13 million. An increase in internet penetration and popularity of these mediums, triggered a rise in popularity of investment across India. Many people from different age groups began investing in equity markets and mutual funds. The retail investors’ share in cash market turnover increase from 39% in 2019 to 45% in 2020.

Government initiative towards financial literacy

Strengthening financial inclusion in India has been an important agenda of the government and the various regulatory bodies such as: RBI, SEBI, IRDAI, PFRDA. Efforts have also been taken to spread awareness and increase financial literacy among small businesses. Listed below are few such initiatives taken by respective regulatory authority:

• Reserve Bank of India (RBI)

RBI being the money market and the banking regulator has launched basic financial education as well as sector focused financial education. These include, financial literacy guides, diaries and posters covering the tenets of financial wellbeing such as savings, concepts of interest, time value, inflation etc. To aid businesses, ATM’s, payment systems, Ponzi schemes, financial awareness messages etc. are some of the other contents covered.

• Securities and Exchange Board of India (SEBI)

SEBI also focuses on enhancing basic financial education and sector wise financial education. Being the Indian capital and securities market regulator, it also arranges events such as the World Investor Week and mass media campaigns. It also has a dedicated investor website.

• Insurance Regulatory and Development Authority of India (IRDAI)

Like the other regulators, IRDAI also works on content development by creating brochures, handbooks etc. It has also created mandatory board approved policy for insurers and arranges various seminars and quiz programs.

• Pension Fund Regulatory and Development Authority (PFRDA)

PFRDA has dedicated website called ‘Pension Sanchay’ launched in 2018. This website aims at increasing financial literacy from retirement perspective.

In addition to the above, the government of India has also implemented several schemes in order to increase financial inclusion such as, Pradhan Mantri Jan Dhan Yojana , Jivan Jyoti Beema , Atal Pension Yojana etc. These schemes are introduced for the ease of banking services, awareness, and general insurance awareness. In addition to this, the government arranges several financial literacy programs like financial education for children, retirement planning, commodity future markets and insurance for school students to educate and spread awareness among the young population.

Outlook for India’s financial literacy

Despite having a population of 1.3 billion people, about 76% of the adult population are yet to improve upon their understanding about basic financial concepts. India has the potential to be among the top financial literate country in the world as 27.6% of its people between the age group 25-44 continue participating in the financial inclusion program through financial education. This rate could expand by more than 20% in the next two decades, if the youngsters within the age group 10-19 are also provided proper financial education. This group constitute about 21.8% of India’s population. Financial abilities could lead to general economic growth and increase the standard of living. India’s work force combined with strong financial education can take the country to great levels. A financially savvy India would be a big global influence.

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Financial Literacy and Financial Education in India: An Assessment

Evidence from around the world presents alarming and widespread deficiencies in financial literacy. This evidence has led to the launch of financial literacy programs in many countries. The programs vary widely in their scope and approach across countries.In India the need for financial literacy is getting greater because of the low level of literacy and large section of population which remains out of the formal financial set up.The goal of this paper is to provide a snapshot of the current status of financial literacy in India with the help of various survey results and the various financial education programs initiated in India to improve the level of financial literacy in India. Some recommendations are also put forwarded to make our financial education programs more effective.

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Editor IJERMS

For the development of the economy of any nation, the financial system should be developed firstly, and for that the residents should be aware of the financial concepts, markets and services. The term Financial Literacy and Financial Inclusion has become a buzz word and the reason behind this is Pradhan Mnathri Jan Dhan Yojana and the quote given by honourable Prime Minister Shri Narender Modi is “ Sabka Sath, Sabka Vikas ” . Financial Literacy is very low world-wide and in the country like India, it is much lower. This paper tries to explore the level of financial literacy in India. The report given by NISM, 2014 that has been retrieved from National Centre for Financial Education website and Report on Financial Literacy around the world : Insights from Standard and Poor ’ s Rating Services Global Financial Literacy Survey.has been analysed. It was found that the level of financial literacy in India is 24% which is very low in comparison to the other developed and developing nations across the globe. Further the suggestions are given to improve the level of financial literacy in India.

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Suhaag Maheria

Multiple studies have tried to examine the level of financial literacy in India. Most of them conclude that financial literacy in the country is lacking. However, due to India's diverse cultural and socio-economic landscape, forming a unified assessment of its financial literacy level is challenging. Conducting a comprehensive nationwide study on financial literacy and its related aspects could provide a deeper understanding, aiding in the formulation of effective policies. This paper conceptualizes various facets concerning financial literacy, encompassing its origins, definition, financial literacy in India, and the role of India's National Centre for Financial Education and various initiatives taken by NCFE. It also discusses financial literacy in India as compared to its neighbouring countries. When examining the financial literacy of adults in neighbouring countries of India, the study reveals that India surpasses Bangladesh, Nepal, and Afghanistan, but falls behind Bhutan, Myanmar, Sri Lanka, China, and Pakistan. Financial literacy levels vary significantly among the states of India. Goa, Chandigarh, and Delhi are the most financially literate states, while Odisha, Sikkim, and Chhattisgarh are the least financially literate states.

esha Pandya

In the recent years financial literacy has become a much talked about phenomena. It is attracting the attention of not only central and state government, central bank and commercial banks but also the common man trying to meet his financial needs on a daily basis and planning for a safe future. The topic of financial literacy is relatively new, and not much of research is available particularly with respect to India. This paper summarizes the growing efforts in the field of financial literacy .An attempt has been made to understand the meaning of financial literacy and identify the need for it taking into consideration the previous research and literature as back ground. It also makes an attempt to identify the major players in the field of financial literacy and summarize their growing efforts in the field. The finding indicate Reserve Bank of India , Securities Exchange Securities exchange board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA) are working actively towards promoting financial literacy The paper has implications for the policy makers in identifying the growing need for financial awareness and developing suitable financial literacy programs It will also help investors in better financial decision making and creating awareness about the importance of financial education besides providing a platform for future research

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International Journal of Financial Management

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This paper aims to analyse the state-wise impact of literacy rates on the financial literacy rates in India. The OECD defines financial education as, "the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being." Financial literacy has been gaining popularity more rapidly than ever in the recent past, amid both developing and developed countries alike. The objective of this paper is to the relationship between literacy rates on the financial literacy rates in India. The methodology employed is a statistical analysis of secondary data collected. The findings show that there exists a positive relationship between literacy levels and financial literacy levels. It is not a particularly strong relationship, though statistically significant. The paper concludes with recommendations and suggestions that could help improve financial literacy rates in India.

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This article attempts to assess the financial literacy of college students in India through the application of a questionnaire. The OECD/INFE Toolkit for Measuring Financial Literacy was employed to collect primary data from a random sample of 400 active university students, using financial behavior, financial knowledge, and financial attitude as variables. Data was analyzed by descriptive statistics using SPSS. This study finds that the Indian students surveyed have low financial literacy, with a score of 11.82 on a scale of 21. Students have very low awareness of compound interest, the erosion of buying power due to inflation, the benefits of diversification, and the use of credible information for financial decision-making. Financial literacy is indispensable for making proper financial decisions and financial education is important for students. Increased financial literacy will result in less financial concern and greater financial wellbeing. Keywords: Financial literacy, Finan...

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Home > Daily-current-affairs

Daily-current-affairs / 11 Feb 2022

Financial Literacy : Daily Current Affairs

Relevance: GS-3: Indian Economy, Growth & Development, Inclusive Growth,

Key phrases: RBI, Go Digital, Go Secure, Global Financial Literacy Excellence, financially literate, National Strategy for Financial Education Report 2020-2025, Project Financial Literacy, Financial Literacy Week

Why in News?

The Reserve Bank of India (RBI) has selected “Go Digital, Go Secure" as this year’s theme for Financial Literacy Week.

According to the report conducted by the Global Financial Literacy Excellence Center, only 24% of the Indian adult population is financially literate. In comparison to other major emerging economies, the financial literacy rate of India is the lowest. This is due to inter-state disparities, lack of formal training and awareness. While other emerging economies have better financial literacy rates, there’s still scope for more improvement.

State and Union: Territories wise levels of Financial Literacy in India is a major concern. Metropolitan areas like Maharashtra, Delhi, and West Bengal have financial literacy rates of 17%, 32%, and 21%, respectively. States like Bihar, Rajasthan, Jharkhand and Uttar Pradesh where poverty is rampant have low literacy rates. The data identifies inter-state disparities. While Goa has the highest literacy rate of 50%, Chhattisgarh is lacking financial education and has the lowest literacy rate of 4%.

Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. Financial literacy is the foundation of your relationship with money, and it is a lifelong journey of learning.

Why Financial Literacy in India is Important?

• Encourage active savings behaviour . Individuals and young people aren’t able to manage their income. There’s a imbalance between consumption and savings. Savings and investment are alien concepts for the majority of the population. With a strong financial education, people effectively manage their saving and investment.
• Develop credit discipline and encourage availing credit from formal financial institutions as per requirement. In the RBI Working Paper Series titled “Persistence of Informal Credit in Rural India,” 42.9% of the population borrow money from informal sources like c ommission agents and money-lenders. These non-institutional sources extend loans on high rates of interest. The firms are unable to manage their finances, hence, landing into the debt trap. With a strong financial education, small firms and owners will be able to make informed decisions and take advantage of resources available to them.
• Manage risk at various life stages through relevant and suitable insurance cover. In the urban cities and metropolitan areas like Mumbai and Delhi, Individuals are unable to allocate their spending’s. According to the data published by The Hindu, while Investment in Fixed assets has been increasing exponentially, there has been a major lack of financial planning in terms of life and health insurance. Most of the people accumulate piles of cash at their home, rather than using it on investments. Such decisions are a testimony to the lack of financial planning. Thus, the value of the accumulated money never increases. With financial education, people will manage their finances effectively.
• Inculcate financial literacy concepts among the various sections of the population through financial education to make it an important life skill.
• Encourage participation in financial markets to meet financial goals and objectives.
• Improve usage of digital financial services in a safe and secure manner.
• India is growing and expanding its base, a good financial education would become an asset for people to get higher earning benefits in return.

Recent Initiatives Towards Financial Literacy

• National Strategy for Financial Education Report 2020-2025: The Reserve Bank of India has released a document titled “National Strategy for Financial Education Report 2020-2025.” The prime strategy includes a “5 C’s” approach for increasing financial education in the country. The approach focuses on Content, Capacity, Community,Communication and Collaboration. The report focuses on creating financially aware and empowered Indians. The Technical Group of Financial Inclusion and Financial Literacy (TGFIFL) and Financial Stability and Development Council (FSDC) work in coordination to ensure the implementation of the same. These policies are in the right direction to make India: a financially literate country.
• The Reserve Bank of India has undertaken a project titled “Project Financial Literacy” , the objective of which is to disseminate information regarding the central bank and general banking concepts to various target groups, including school and college students, women, rural and urban poor, defense personnel and senior citizens.
• In 2012, FSDC (Financial Stability and Development Council) had formulated a National Strategy on Financial Education (NSFE) to spread awareness among masses about basic questions such as – why one should invest?, why one should borrow from bank? Under this, FSDC had proposed to make financial literacy an official responsibility of the industry stakeholders such as financial institutions, banks and regulators including RBI, SEBI, IrDA and PFRDA.

Way forward:

In a population of 1.3 billion, emphasis on financial education will make a long-lasting impact. There’s no doubt that Indian schools need to make financial education compulsory for all.

Over the years, the government has initiated policies to improve unsatisfactory literacy rates. However, all the programs initiated have a fundamental problem – a lack of implementation.

Government spending on financial education would give them higher returns. Financial literacy is the doorway to effective human capital formation.

Financial skills will help to raise the standard of living and contribute to overall growth. Our labour force combined with good financial education would help us in eradicating poverty to some extent. In short, a financially smart India would be a major force in the world.

Financial Literacy Week

Reserve Bank of India (RBI) has been conducting Financial Literacy Week (FLW) every year since 2016 to propagate financial education messages on a particular theme across the country.

The theme selected for current year FLW is “Go Digital, Go Secure” which will be observed between February 14-18, 2022. This theme is one of the strategic objectives of the National Strategy for Financial Education 2020-2025. Focus will be on creating awareness about (a) Convenience of digital transactions; (b) Security of digital transactions; and (c) Protection of customers.

Banks have been advised to disseminate the information and create awareness among their customers and general public. Further, RBI will undertake mass media campaign during the month of February 2022 to disseminate essential financial awareness messages to the general public.

Source: Live Mint

Mains Question:

Q. Explain the importance of financial literacy to develop a vibrant and stable financial system in India. Suggest measures to improve financial literacy in India.

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