18 MAR,2024 | MEDC
Financial literacy is an important tool for bringing about India’s economic rejuvenation. Along with infrastructure and investments, a financially literate population will go a long way in transforming our growth story and contributing to the vision of Viksit Bharat. Only a fraction of India’s population has the required knowhow to wisely invest their hard-earned money in the right place at the right time and benefit from the power of compounding. This fact is too important to be left to chance and rectifying it has to form an integral part of an official and proactive policy intervention. Financial literacy is the key driver of every major economy, and India cannot be an exception to this rule. Fortunately, the RBI has been taking a positive and proactive stance in this area.
Since its inception, the Integrated Ombudsman Scheme of the RBI has been instrumental in enhancing consumer protection, and encouraging regulated entities to adopt safe business practices and address consumer grievances. This is the first step to enhancing financial literacy, as it gives the public the incentive and the confidence to prepare themselves for the future. Many of the government’s advertisement campaigns, including the now well-known RBI Kehta Hai have been successful in enhancing public awareness in the key areas of investing and financial decision-making under risk and uncertainty. Being financially aware is not only important to the individual household and family, but it also matters to the development of the community and nation as a whole. While the need for financial literacy has always mattered, today’s market and policy realities have further enhanced the necessity of being financially savvy.
A key barrier to reaching full financial literacy is low digital penetration. As financial products and services are now increasingly delivered digitally, they remain out of reach for many in the hinterland, where reliable online connectivity continues to remain an issue. Rolling out effective initiatives that improve digital penetration could substantially improve financial literacy and financial health in the general population of India, especially among disadvantaged groups. But designing and implementing successful digital and financial literacy initiatives can be complex. Public and private sector entities, along with NGOs, need to cooperate and collaborate on literacy content, strategies for reaching end users, and the evaluation of pilot projects.
Thanks largely to GST, the process of formalizing our economy is gathering pace, and enhancing financial literacy will help to expedite it. While many schemes of the RBI seem to be working well, policymakers should focus more on spreading financial literacy to improve the awareness of the general public, which would lead to better monetary decisions and more inclusive socioeconomic growth throughout the country. To this end, it is important to embrace new channels and creative approaches for ensuring an effective reach of personalized and individualized financial services and education initiatives in the far-flung parts of India, where they are most needed.
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