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The government of India and the 4 financial sector regulators (the Reserve Bank of India (RBI), the Securities Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI), and the Pension Fund Regulatory Authority of India) have all prioritised improving financial inclusion in the country (PFRDA). Financial literacy promotes financial inclusion by enabling customers to make well-informed decisions that benefit their financial well-being.
Financial literacy is defined as a set of financial awareness, knowledge, skills, attitudes, and behaviours that enable people to make wise financial decisions and, as a result, attain financial well-being (OECD, 2012). Financial education, on the other hand, is defined as “the process by which investors enhance their knowledge of the financial products, concepts, and risks, and develop skills and self-belief to become more aware of marketing opportunities and risks, to make wise decisions, to know where to seek help, and to take other necessary steps to improve one’s financial well-being through information, instruction, and objective advice.”
Financial literacy is critical since it will provide you with the skills and knowledge necessary to manage finances efficiently. In the absence of the same, actions and choices regarding savings and investments would be without a solid foundation. Financial literacy, on the other hand, will assist in better comprehending financial concepts and enabling us to manage the funds effectively. It will also assist in making sound financial decisions and reaching financial security.
To make financial literacy a vital life skill, instil financial literacy concepts in diverse segments of the public through financial education.
- Encourage active saving and financial market engagement in order to achieve financial goals and objectives.
- Promote credit discipline and promote the use of legitimate financial institutions for credit as needed.
- Improve the safe and secure use of digital financial services.
- Assess risks at various periods of life with appropriate insurance coverage.
- Plan for retirement and old age by purchasing appropriate pension packages.
- Understanding one’s rights, responsibilities, and options for resolving grievances
- To analyse progress in financial education and improve research and assessment tools.
To meet the Strategic Objectives, the document suggests using a “5 C” approach to financial education dissemination, with an emphasis on developing valuable Content (including curriculum in schools, colleges, and training establishments), developing Ability among some of the intermediaries involved in providing banking services, and leveraging the positive effect of a community-led prototype for personal finance through appropriate Communication.
- CONTENT: Financial education content for different segments of the population.
- CONDUCT: Build capability and establish a “Code of Conduct” for financial planning providers.
- COMMUNITY: Develop community-led means to disseminate financial literacy sustainingly.
- COMMUNICATE: To disseminate financial education messages and use technology, media, and new methods of communication.
- COLLABORATION: Streamline other stakeholders’ efforts to improve financial literacy.
It is defined as a combination of financial awareness, knowledge, skills, attitude, and behaviour required to make prudent financial decisions and ultimately attain individual financial well-being, according to the Organization for Economic Co-operation and Development (OECD).
It is described as the procedure through which financial customers improve their understanding of the financial products, concepts, and risks and develop the skills and self-belief to become more aware of financial threats and opportunities, to make informed decisions, to know where to seek help, and to take both these actions to improve their financial well-being, through information, instruction, and objective advice.
Conclusion
Over the last several years, India has made significant progress in integrating its population into formal banking institutions. The government has taken a number of key financial inclusion efforts, such as PMDJY. However, the country has a long wait to reach a decent level of financial literacy, which is critical for inclusive growth. Newer modes, such as social media platforms, should be properly employed in addition to the previously existing delivery options for spreading financial education messages.
