In a society where a large chunk of people are financially excluded, financial literacy would play a game changing role in promoting financial inclusion. In March 2010, Hon’ble Finance Minister of India during RBI-OECD Workshop on Financial Literacy mentioned: “ Financial literacy, and education, plays a crucial role financial inclusion, inclusive growth and sustainable prosperity”.

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[Financial literacy camp organized by Abhyutthana Financial Literacy Centre in a school, in Odisha]
Financial Literacy in India - Harbinger of Social Change
Dasarathi Mishra, A former Central Banker
n a society where a large chunk of people are financially excluded, financial literacy would
play a game changing role in promoting financial inclusion. In March 2010, Hon’ble
Finance Minister during RBI-OECD Workshop on Financial Literacy mentioned: “ Financial
literacy, and education, plays a crucial role financial inclusion, inclusive growth and sustainable
prosperity”.
Financial literacy is elementary level of financial education. According to experts,
financial education ranges from financial literacy at one end of the spectrum to deeper
understanding of financial products, services and markets at the other end (Ardhendu Singh and

2. Bhama Vekataraman, 2012). In a financial literacy programme, the focus is on the individual.
Individuals get empowered, who get access to the world of financial knowledge, skill to
undertake banking and other financial transactions. Individuals are capable of identifying, and
using appropriate financial products and services to build and preserve their assets over time.
Better informed people can take greater responsibilities on financial matters. With integrating
into overall process of financial inclusion, financial literacy can be a harbinger of change in a
society.
Let us know what financial literacy means. Noted economist Atkinson defines financial
literacy as “a combination of awareness, knowledge, skills, attitude and behaviors necessary to
make sound financial decisions”. The OECD follows the definition of financial literacy
developed by Atkinson and Messey (2012). The OECD definition is explained asunder:
Dimension
Elements
Knowledge Financial concepts, simple and
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compounded interest,
management of money,
inflation , risk diversifications
Behaviour Monitor personal finance,
setting long term financial
planning, paying bills on time,
repayment behavior.
Attitude Inculcating saving habits,
satisfaction from saving,
paying statutory fees, repaying
the loans.
Former Governor of Reserve Bank of India, Dr. D Subbarao once mentioned : Financial
literacy stimulates the demand side – making people aware of what they can and should demand.
Financial inclusion acts from the supply side – providing in the financial market what people
demand…Financial literacy and education should be developed hand in hand with improving
access to financial services.
Reserve Bank of India has taken several proactive measures for furtherance of financial
literacy. At the instance of RBI, banks have set up Financial Literacy Centres (FLC). According
to RBI Annual Report 2014, as on March –end 2014, 942 FLCs have been set up. A total of 3.8
million people have been imparted financial literacy through in-door education to walk-in
persons and through out-door awareness camps, seminars, lectures and town hall meetings,
during 2013-14. RBI has advised commercial banks to conduct a minimum of one out-door
financial literacy camp at the rural branches through such FLCs.

3. In 2007, RBI launched a Financial Literacy Project to bring banking knowledge to the
common man, educate them the basics of money and advantage of saving with banks. The
objective of the project is to disseminate information on general banking, central bank for
various target groups such as school, college students, women, rural and urban poor and senior
citizens. The project is designed to be implemented in two modules. In the first module in
which ‘Money Kumar’ familiarizes the target group the role and functions of RBI; in the second
module ‘Raju and Money Tree’ introduces to simple banking concepts. The material is available
on RBI web-site (www.rbi.org.in), in 11 major languages. It contains Financial Literacy Guide-a
ready reckoner for trainers, Financial Diary for partic ipants, and posters for easy
understanding. The guide is meant to be used by the branch managers in rural centres and lead
District Managers for their monthly literacy camps. With suitable customization these can be
used for financially excluded populace in urban centres.
Financial literacy programmes require trained instructors. The instructors or counsellors
must attend to bank customers the time they are making important financial decisions. In this
context, it would be useful to study successful experiments from NGOs such as SEWA, Gujarat
which started a financial counseling training service for poor self-employed women.
National Strategy for Financial Education (NSFE)
In 2012, NSFE was prepared by the technical group of the Financial Sector Development
Council ( FSDC), an apex body with Finance Minister as the Chairman and RBI Governor as
Vice- Chairman. Some of the methods mentioned in the NSFE to spread financial literacy are :
 Create awareness about consumer protection and grievance redressal machinery
available in the country.
 The financial education can be delivered by trained personnel in a format suitable to each
target group.
 To establish initial contacts with 500 million adults, educating them on key areas of
saving, knowledge of investment-related products.
 The task is huge one. Thus the financial education measures would be undertaken
through various stakeholders including sectoral regulators, banks, financial institutions,
resource persons empanelled by SEBI, Institute of Chartered Accountants of India, civil
society and NGOs.
 To incorporate basic financial education in school curricula upto senior secondary level
Pradhan Mantri Jan Dhan Yojana ( PMJDY)
The Hon’ble Prime Minister launched the PMJDY on August 28, 2014. JDY leverages the
achievements of UIDAI and National Payment Corporation of India ( NPCI) as well as inclusion
efforts of banking network. Prime Minister Shri Narendra Modi declared the beginning of the
end of “financial untouchability” with the opening of 15 million bank accounts across the
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4. country, in an exercise unprecedented in scale in economic history of India. With a bank account,
every household gains access to banking and credit facilities.
Financial literacy has been accorded priority under PMJDY.A standardized financial literacy
material has been prepared in vernacular language to create awareness about the Yojana.
Delivery Channels
The delivery channels for implementation of financial literacy could be multifarious. The
following would be plausible channels:
Schools: The school syllabus up to senior secondary level s should have financial awareness and
financial literacy. At the national level CBSE and at the state level respective sta te governments
should take initiative to implement the same. Till that time, financial literacy camps, seminars
can be held at the school and college level by the banks and NGOs drawing resources of experts.
Resource Persons: Presently SEBI and Institute of Chartered Accountants of India empanel
Resource Persons to conduct Investor Awareness Programs to be conducted in small towns,
blocks, cities, villages, districts. The resource person has to plan and organize Investor
Awareness Programs of two hours duration at his/her initiative. Arranging venue, assembling at
least 50 participants per program and disseminating financial literacy will be his responsibilities.
Social Marketing
The financial literacy can be imparted through dedicated financial education network, Radio/ TV
print media and use of Face Book.
Financial literacy would usher in financial empowerment of the people. It would
unshackle the poor from the clutches of money–lenders and unorganized sector. Financial
inclusion can be a reality in true sense!
References:
i) Annual Report, 2013-14, ( August 2014), Reserve Bank of India, Mumbai
ii) Ardhendu Singh, Bhama Venkataramani (2012), Financial Education: Institutes of
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Higher Education as delivery channels, Symbiosis School of Business Management,
Pune, MPRA Paper No: 43336.
iii) National Strategy for Financial Education, (2011), Government of India.
( The writer is a former CGM , Reserve Bank of India).
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