National Strategy for
Financial Education
The first decade of the 21st century has
seen a universal recognition for spreading
financial literacy among people. Most
of the countries are adopting a
unified and coordinated national strategy for financial education. Given the fact that India is having large population, a
fast growing economy with national focus on inclusive growth and an urgent need
to develop a vibrant and stable financial system, it has become all the more necessary to quickly formulate and implement a national strategy.
Also since a large number of stakeholders
including the central and state governments, financial regulators,
financial institutions,
civil society, educationists and others are involved in spreading financial
literacy; a broad national strategy is a prerequisite to ensure that they work in tandem according to the
strategy and not at cross purposes.
The National Strategy,
thus, seeks to create a financially aware and empowered India . It aims
at undertaking a massive Financial Education campaign to help people manage
money more effectively to achieve financial well being by accessing appropriate
financial products and services through regulated entities
What is Financial Literacy?
Organization for Economic Cooperation
& Development defines
Financial Literacy as a
combination of financial awareness, knowledge, skills, attitude and behaviour
necessary to make sound
financial decisions and ultimately achieve individual financial well being.
People achieve financial literacy through a process of financial education.
Financial Inclusion: A Top
Policy Priority of Government
Government of India has recognized the importance
of spreading financial literacy to intensify efforts to channelize domestic
savings to investments. However, increasing
range and complexity of products has made
it very difficult for an ordinary person to take an informed decision.
Financial literacy develops confidence, knowledge and skills to manage
financial products and services enabling them to have more control of their
present and future circumstances. Financial literacy will also help in
protecting society and individuals against exploitative financial schemes and exorbitant interest rate charged by
moneylenders.
It is expected that financial education can
lead to multiplier effects in the economy. A well educated household would
resort to regular savings, which in turn would lead to investment in right
channels and income generation. Thus, the financial well being of individuals, will in turn increase
the welfare of the society.
International Experience
and the Lessons for India
Globally, Countries like Czech Republic ,
Netherlands , New Zealand , Spain ,
and UK
have already implemented National Strategy for Financial Education, while many
other countries are in the process of formulation and implementation.
In India , we need a tiered approach
under National strategy in
view of our diversity. The
draft National Strategy has been prepared with the objectives of i) Creating awareness and educating
consumers on access to financial services, various types of products and their
features, ii)changing attitudes to translate knowledge into behavior and iii) Making consumers understand their
rights and responsibilities as clients of financial services.
Given the fast pace of changes in the
financial world, it has
been envisaged to have a five year timeframe for implementing the strategy,
using Strategic Action Plans.
Sample Survey to Assess
the State of Financial Literacy and Inclusion
The Strategy provides for conduct of a
nation wide sample survey for assessing the state of financial inclusion and
financial literacy. The survey, inter-alia will assess the level of financial
inclusion, level of financial awareness about various financial products, level
of financial competency to make informed decisions, people’s attitude towards
money as well as their attitude towards risk taking.
Based on the assessment of the survey,
various financial regulators would develop their financial education modules to
address the needs of their clients. It would then be delivered through school
curriculum, social marketing, advertising through radio, television, print and
outdoor and by setting up dedicated financial education websites. There is also
a proposal to rope in Self-Help Groups, Micro-Finance Institutions, investors
and consumer associations etc.
Financial Education in
School Curriculum
Governments have recognized that
financial education should start at school and that people should be educated
about financial matters as early as possible in their lives. Organization for
Economic Cooperation & Development has developed Guidelines to assist
policymakers and interested stakeholders in designing, introducing and
developing efficient financial education
programmes in schools.
However, it needs to clearly be specified
that the financial education would not be another subject taught in the
schools. What is needed is its appropriate
integration in the school curriculum. For example, compound interest is taught
in Arithmetic as an abstract concept of, A lending to B at some interest rate
compounded annually. This can be turned into an opportunity of financial
education by weaving into a problem of a company that borrows from a bank or a
bank customer who opens a Cumulative Deposit Account instead of a simple Fixed
Deposit Account. Similarly, moral science courses could have content which are
based on day to day financial transactions
CBSE has agreed, in principle, to
introduce it in an integral manner in school education at the post primary
level and to facilitate the process, a committee of experts has been
constituted.
Synergizing the Efforts of
Regulators in Spreading Financial Literacy.
In India ,
various financial regulators including Reserve Bank of India , Securities Exchange Board of
India, Insurance Regulatory & Development Authority etc have already
embarked upon massive financial literacy programmes adopting multi-pronged
approach.
Reserve Bank of India has undertaken a
project titled ‘Project Financial Literacy’ 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.
Securities Exchange Board of India has
empanelled Resource Persons throughout India who organize workshops to
target segments on various aspects viz. savings, investment, financial
planning, banking, insurance, retirement planning etc. More than 3500 workshops
have been already conducted in various states covering nearly 3 lakh
participants.
Insurance Regulatory & Development
Authority has been disseminating simple messages about the rights and duties of
policyholders, channels available for dispute redressal etc through radio, TV
and print media in English, Hindi and 11 other Indian languages.
The Pension Fund Regulatory and
Development Authority(PFRDA) has been engaged in spreading social security
messages to the public. PFRDA
has developed FAQ on pension related topics on its website, and has been
associated with various non government organizations in India in taking
the pension services to the disadvantaged community.
Similarly, commercial banks,
Stock Exchanges, Broking Houses and Mutual Funds have the initiatives in the
field of financial education that spawns conducting of seminars, issuance of
do’s and don’ts, and newspaper campaigns.
It will be necessary to collate and
classify the vast amount of material developed by these institutions that can
serve as the knowledge base for financial education in India .
Institutional arrangements envisage
creation of the National Institute of Financial Education(NIFE), with
representatives of various regulators as members. The main role of NIFE shall be to
create financial education material for respective financial sectors. NIFE
shall also create and maintain a website exclusively for financial education.
The entire policy is sought to be
implemented through existing institutional mechanism. The Technical Group of Sub-Committee
of Financial Stability & Development Council on Financial Inclusion and Financial Literacy shall be made responsible
for periodic monitoring and implementation of the strategy.
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