Financial Literacy in India

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A person who understands money matters, transactions, earning process, investing wisely for growth is called a “Financially Literate Person”.

The growth and development of a country primarily depends on the financial literacy of their individuals. Financial market economies develop because of the financial literacy.

In recent times, it has become very important for a person to be financial literate. Financial literacy is important not only for investment purpose but for managing personal financial resources in case of households also. Micro level financial decisions affect collectively to become Macro level policies. With financial literacy, one can very well understand risk factors, inflation, interests (Simple & compound) and prevailing economic conditions. A person, after financial literacy, can give due importance to his budgeting, spending, saving, insuring and investing meticulously.

As per the survey conducted by Standard & Poor’s Rating Services (S & P), in India almost 76% of the population is not fully financial literate. 48% of Indian population still depends on day to day earnings. Only 58-59% of Indians have Bank accounts. Still we have 14% of population who do not save for their future in a formal way.

In 2011, Government of India started a campaign to cover 74000 villages with banking facilities, wherein the population of each village (as per 2001 census) was more than 2000. Banking facility if provided helps in creating banking awareness or in other words some kind of financial literacy. If financial products reach common people, people become aware of those financial products and they start managing their financial needs.

A concerted effort is required, by the central government, state governments, NGOs, SHGs, private institutions for financial awareness among the masses. Various organizations/agencies have started taking steps to increase financial literacy like, Reserve Bank of India (RBI), public sector and private sector Banks, Securities & Exchange Board of India(SEBI), Insurance Regulatory & Development Authority(IRDA), Pension Fund Regulatory & Development Authority(PFRDA), Ministry of Corporate Affairs(MCA), Institute of Chartered Accountants of India(ICAI), Institute of Cost & Works Accountants of India(ICWAI) etc.

Central government has introduced Prime Minister Jan-Dhan Yojana(PMJDY) which is considered as a great step towards banking awareness amongst masses.

More efforts are required for financial literacy of Indian Masses, like, organizing programs such as seminars, trainings, bringing masses into banking fold, highlighting of financial products/services through print/electronic media, handbooks distribution. These efforts can be done through school curriculum, social marketing, adult education, SHGs, micro-financing institutions etc.

To make India a economic power on the world map, it is the prime duty of everyone of us to be financially literate.

Lalit Virmani (Author is an Ex-Banker (Retired Executive from a Leading Nationalized Bank) presently a Finance Consultant)You may contact the author at

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