Financial literacy is the ability of a person to effectively manage variety of financial skills, such as personal finance management, budgeting, and investing. In India, the need for financial literacy is necessary as the education level of Indians is low and large section of the population is still outside the formal financial system. Financial literacy is a precondition for success of Financial Inclusion.
For effective Financial Inclusion, Financial Literacy is essential to ensure financial services reach the unreached & under-reached section of the Society. Government of India along with various regulators are constantly working towards growth by implementing financial literacy courses, workshops and schemes.
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: Many people borrowed money from informal sources and pay higher interests. Financial education can help poor people to 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 opening of many new Savings Bank accounts. These accounts have led to an ease in doing business as well as personal transactions to a great extent.
- Growth of MSMEs: MSMEs contribute to 29% of India’s GDP with 50% of exports coming from this sector. Financial literacy can help small businesses to grow and introduction of new business Entrepreneurs to increase growth to the sector.
Government initiativesforFinancial Literacy
- Financial Inclusion in India is an important agenda of the Government and regulatory bodies such as, Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority.
Initiatives of Reserve Bank of India
Reserve Bank of India, being the money market and the banking regulator has launched basic and sector focused financial education. These include, financial literacy guides, diaries and posters covering the tenets of financial wellbeing such as savings, various concepts of interest calculations, time value, inflation etc. To aid businesses, ATM payment systems, Ponzi schemes, financial awareness messages and so on are some of the other contents covered.
Initiatives ofSecurities and Exchange Board of India
Securities and Exchange Board of Indiaalso focuses on enhancing basic andsector wise financial education. Being the Indian capital and securities market regulator, it also arranges events such as World Investor Week and mass media campaigns. It also has a dedicated investor website.
Initiatives ofInsurance Regulatory and Development Authority of India
Like the other regulators, Initiatives of Insurance Regulatory and Development Authority of India also works on content development by creating Brochures, Handbooks and so on. It has also created mandatory board approved policy for insurers and arranges various seminars and quiz programmes.
Initiatives of Pension Fund Regulatory and Development Authority
Pension Fund Regulatory and Development Authorityhas a 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, Pradhan Mantri Jeevan Jyoti Bhima, Pradhan Mantri Suraksha Bhima Yojana, Atal Pension Yojana and PMJDYOD. 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 for aged, commodity future markets and insurance for school students to educate and spread awareness among the young population.
RBI has prescribed the following topics for basic financial education
Savings, Borrowings, Concept of interest calculation (Simple and Compounding), Time value of money, Inflation, Relation between risk & rewards etc.
Sector focused Financial Education:
- The content covers relevant topics in the banking sector such as ATM, payment systems such as NEFT, RTGS, UPI, USSD, awareness about sachet portal, keeping away from Ponzi schemes, fictitious emails/calls, KYC, exercising Credit Discipline, Business Correspondents, Aadhar Enrolment Centres and etc. A Financial Awareness Messages booklet for general public and Posters on financial literacy for the Financial Literacy Week have been made available on the Financial Education webpage of Reserve Bank of India’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 and so on. Reserve Bank of India also empowers members of public by informing 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, Television, 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 Reserve Bank of India 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. 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), FIFA World Cup, Asian Games, Kaun Banega Crorepati (KBC), Pro Kabbadi League and Pro Badminton League.
- A film on BSBDA 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.
Reserve Bank of India (RBI) has been conducting Financial Literacy Week (FLW) every year since 2016 to propagate financial education messages on relevant themes.
The theme for the current year is to be observed from 13th to 17th February 2023 is “Good Financial Behaviour, Your Saviour”, with emphasis on “Saving, planning, and budgeting and Prudent use of digital financial services” which aligns with overall strategic objectives of the National Strategy for Financial Education, 2020-2025.
Banks have been advised to disseminate information and create awareness among their customers and the public on the above theme by displaying posters that have been developed by RBI on their websites, ATMs, mobile applications, and digital display boards deployed in their branches.
In order to provide this, Bankshas to establish Financial Literacy and Credit CounsellingCentres (FLCCs) on its own in their lead areas/other areas as per the requirement of local Government / State Level Bankers Committee / Block Level Bankers Committee or may associate with other Banks in non-lead areas for establishing a Trust to promote financial literacy.
- Bank’s Financial Literacy Centres (FLCCs) provide free financial literacy / education, credit counselling services and create awareness among the public regarding their rights and responsibilities in banking services.
- Bank will strive to educate people in rural and urban areas with regard to various financial products & services available from the Bank, such as organizing group meetings, Gram Sabha, Participation in publicity campaign such as Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Mudra Yojana(PMMY), Pradhan Mantri Jeevan Jyoti Bhima, Pradhan Mantri Suraksha Bhima Yojana, Atal Pension Yojanaand PMJDYOD, distribution/display of publicity materials on Financial Inclusion such as Posters, Pamphlets, Organizing skits, Magic shows, Debates, Essay writing competition, Quiz for school children in village. It will also conduct training and capacity building programs of Business Correspondents to enable them to pass the certification course of Indian Institute of Banking and Finance.
- Financial and Digital literacy programme to include basic education on savings, credit, insurance, pension and to be more specific on digital banking aspects like Unified Payments Interface (UPI), Unstructured Supplementary Service Data (USSD), Bharat Interface for Money (BHIM) and other mobile apps.
Objectives of Financial Literacy Centres
Financial Literacy Centres are the building blocks or the basic units that initiates the financial literacy activities at the ground level. As per guidelines of Reserve Bank of India, every bank should put in place board approved policies on the modalities for engagement/recruitment of Counsellors in Financial Literacy Centres. Some of the major points while engaging/recruiting Financial Literacy Counsellors are as under:
- The qualification and knowledge/skills of the Counsellors in conducting camps
- Prior Experience in banking and related fields
- Working knowledge of computer
- Knowledge of local language
- Maximum age for Counsellors
Opening of Financial Literacy Centres
State Level Bankers Committee allocates selected districts to concerned Bank for opening Financial Literacy Centres
Procedure for recruitment of Counsellor for Financial Literacy Centre
- Banksmust give advertisement for engagement of Financial Literacy Counsellors in Newspapers
- After receiving the application, the interview of the shortlisted eligible candidates will be conducted by a committee comprising of the Bank, District Development Manager of National Bank for Agriculture &Rural Development
- After interview, the respective Bank will send recommendation for appointment of Financial Literacy Centre Counsellor to their Head Office
- Selected candidates for the post of Financial Literacy CentreCounsellorsmust provide a security deposit in favour of Bank
- Issue a letter of Engagement for appointment of new Financial Literacy CentreCounsellors as well as for extension of contract of Financial Literacy CentreCounsellors
Eligibility criteria for Counsellor of Financial Literacy Centre
- Though there is no restriction of age, generally Banks are considering till completion of 65 years
- Counsellor should be a Graduate
- Counsellor can be a retiredor Voluntarily Retired Bank employee. However, in case of non-availability of retired Bank employee, candidate having Banking knowledge and knowledge of Financial services / having completed relevant certification course from Indian Institute of Banking & Finance is to be considered
- Counsellor should be computer literate knowing basics and Internet
- Counsellor must have the knowledge of local language in the area of posting
Infrastructure requirement for Financial Literacy Centre
- The respective State Government should consider providing premises free of cost or at a nominal rent preferably within the campus of the District Collectorate to provide adequate access to the public.
- The premises should consist of a room for Counsellor, a Cubicle for counselling purpose, Staff room, Toilet etc.
- The area of premises should be at least 200 square feet
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.So, let us join together to campaign for Saving, Planning & Budgeting and prudent use of Digital Financial Services to unreached & under-reached sections of the Society.