Swaminathan J: Charting a course to prosperity - the importance of
financial literacy
Speech by Mr Swaminathan J, Deputy Governor of the Reserve Bank of India, at the
Conclave on Financial Literacy, Madurai , 8 April 2024.
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Smt. Divyadarshini IAS, Managing Director, Tamil Nadu Corporation for Development of
Women; Shri Shankar Narayan, CGM, NABARD, Chennai; Shri Vasimalai, Executive
Director, Dhan foundation; Convenors of SLBC, Tamil Nadu and Puducherry; Smt. Uma
Sankar, Regional Director, RBI, Chennai; senior bankers; Financial Literacy
Counsellors; Associates and Coordinators of Centre for Financial Literacy; Financial
Literacy Community Resource Persons; ladies and gentleman, I am happy to
inaugurate the Conclave on Financial Literacy at Madurai today.
Madurai holds an important place in the history of Tamil Nadu. The city is famous for its
rich heritage, and promotion of Tamil language through "Sangams", thereby, the city is
fondly referred as "sangam valartha nagaram".
The city was also graced by the presence of Saint Thiruvalluvar more than 2,000 years
ago. In the context of today's conference, I would like to recall one of his famous
couplets which succinctly explained the importance of financial planning for the kings
and people.
"
", (Thirukural No. 478)
The Saint explains through his Kural that even though the income of a king may be
small, it will not cause his ruin if his outflows are not larger than his income.
In fact, this sage advice is even more relevant in today's consumerist economy. A
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recent survey by the Mint newspaper reveals that 50 per cent of Indian shoppers are
choosing to consume now rather than focus on long-term financial planning. Therefore,
there is a need to instil the idea of financial planning, budgeting, and saving amongst
the people, especially youngsters, for ensuring financial discipline from an early age.
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Financial literacy calls for empowering people with the knowledge and understanding
of various financial concepts so that they can make informed choices about their money
and utilise financial services appropriately.
Indeed, financial literacy is central to supporting the developmental objectives of
inclusive growth. By addressing the demand side of financial inclusion, financial literacy
enables people to understand the benefits of formal financial products and regulated
financial providers as well as to make suitable choices across savings, credit,
insurance, pension and remittances.
Fortunately, the Indian economy today is the fastest growing amongst the major
economies of the world. However, for this growth to be inclusive, it is imperative that we
have a financial system that works for all. This objective stands at the heart of all the
efforts being made by the RBI towards financial inclusion.
Enhancing financial literacy in India demands a multi-faceted approach involving
collaboration between the government, financial institutions, non-profit organizations,
and the private sector. It requires targeted educational programs, awareness
campaigns, and innovative solutions that cater to the diverse needs and preferences of
different demographic groups.
Recognising this, India's National Strategy for Financial Education (NSFE) for the
period 2020-2025 has been formulated as a forward-looking framework designed to
meet these requirements. The '5 C' approach of the strategy emphasises:
i. the development of relevant C ontent in the curriculum in schools, colleges and
training establishments,
ii. developing C apacity among intermediaries involved in providing financial services,
iii. leveraging the positive effect of C ommunity-led model for financial literacy,
iv. appropriate C ommunication strategy for financial literacy, and,
v. enhancing C ollaboration among various stakeholders.
The strategy aims to equip people from all walks of life with the knowledge and tools
they need to navigate the complexities of the financial landscape.
On its part, the RBI has adopted several measures to enhance the channels for
disseminating financial literacy. It has promoted various public awareness campaigns
such as RBI Kehta Hai and continues to create and update financial literacy content on
its website. Today, there is a substantial volume of literature available on the RBI
website in 13 languages including English and Hindi to create awareness on financial
education for stakeholders to download and use.
The National Strategy for Financial Education also emphasizes the importance of
empowering the younger generation with essential money management skills. In
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keeping with this, RBI through the National Centre for Financial Education been
promoting financial literacy among students through various initiatives and programs
such as integrating financial education in the school curriculum for classes VI to X. The
National Financial Literacy Assessment Test of NCFE is globally one of the largest free
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annual financial literacy tests for school students .
Last year we conducted an All-India Quiz on Financial Literacy for students of Class
VIII, IX and X of Government/Municipal Schools, in which more than one lakh students
from nearly 52,000 schools participated. We are also planning for an All-India quiz for
college students later this year as part of RBI's 90th year celebrations.
RBI has been observing Financial Literacy Week every year since 2016 with a view to
disseminating financial education messages on various important and relevant themes
to the public. This year, Financial Literacy Week was observed between February 26
and March 1, on the theme viz. Make a Right Start, Become Financially Smart,
targeting students and young adults, with a view to driving home the message that the
young generation needs to be equipped with financial literacy and financial planning
skills at an early stage.
More than a decade ago, in June 2012, the RBI advised Lead Banks in districts to set
up Financial Literacy Centres. These Financial Literacy Centres are required to conduct
financial literacy programs, workshops, and awareness campaigns to educate people
about basic financial concepts, such as savings, budgeting, borrowing, and insurance,
as well as more complex topics like investment strategies and retirement planning. I am
happy to note that by December 31, 2023, Lead Banks had established more than
1,500 Financial Literacy Centres at district headquarters. The camps conducted by
them have covered more than 30 lakh participants. In Tamil Nadu and Puducherry, the
77 Financial Literacy Centres have covered more than 1.45 lakh participants.
Apart from direct initiatives to promote awareness, the Reserve Bank also collaborates
with other stakeholders to increase financial literacy. The Centres for Financial Literacy
(CFL) project, initiated in 2017, is a shining example of this collaborative approach
involving banks and NGOs with funding support from funds administered by NABARD
and RBI. As on March 31, 2024, 2,406 CFLs have been operationalized covering blocks
across the length and breadth of the country, 129 of which are in Tamil Nadu and
Puducherry.
Despite good progress being made in these areas, there are still significant challenges
and gaps that need to be addressed. In this context, I would like to highlight five focus
areas.
Bridging the Digital Divide
As financial services increasingly move online, there is a risk of excluding those who
lack access to digital technology or who are not familiar with how to use it. Bridging the
digital divide is crucial for ensuring everyone can participate in the modern financial
system.
By optimally using technology, we can unlock its transformative potential to advance
financial inclusion. Recognizing that many individuals lack access to traditional banking
services but may have access to mobile phones or other digital devices, opens a
window to explore innovative digital solutions.
To bridge the digital divide, we need to have tailored digital literacy programs that cater
to the specific needs and capabilities of different demographic groups. These programs
can provide hands-on training on how to use digital financial services, navigate online
platforms, and protect against cyber risks, thereby empowering individuals to fully
participate in the digital economy.
Capacity Building
Secondly, adequate focus needs to be given to on-going capacity building of the
counsellors engaged in financial literacy campaigns so that they are kept abreast of the
latest and relevant information on financial products and customer protection.
The financial landscape is constantly evolving, hence it is crucial for counsellors to stay
updated to be able to provide accurate and timely guidance. Organizing regular training
programs and workshops can provide counsellors with opportunities to enhance their
knowledge and skills. Leveraging technology, we can provide counsellors with access
to online training modules, webinars, and digital resources.
Greater collaboration
The third aspect I would like to highlight is the need for greater collaboration. There
should be synchronization at the ground level between different stakeholders such as
Lead District Manager, District Development Manager, Block Level officials, NGOs,
SHGs, BCs, Farmer's Clubs, Panchayats, village level functionaries etc. Banks running
FLCs and NGOs operating CFLs need to ensure that as far as possible there is no gap
in the availability of counsellors either at the FLCs or CFLs so that their activities can be
conducted smoothly.
Being outcome and results oriented
Fourthly, I would like to emphasise that CFLs and FLCs should not be mere awareness
hubs, but catalysts driving tangible transformation, for a substantive and enduring
change. We must strive to gauge the efficacy of our efforts by quantifying outcomes
such as the number of beneficiaries successfully integrated into formal financial
systems as a direct result of participating in our financial awareness camps and
programs.
Recognising the role of women
Lastly and most importantly, I would like to recognise the role of women in promoting
financial literacy.
Women play a crucial role in budgeting within households, as they often manage
day-today finances, make purchasing decisions, and ensure the financial well-being of their
families. They are adept at effectively allocating resources to meet the diverse needs of
their families. They often negotiate better with vendors and service providers to
optimise the family's budget and maximize savings.
It is said that 'educate a man, you educate only one person. If you educate a woman,
you educate a generation'. When women are educated and financially literate, they
often serve as the primary educators within their families. Therefore, please ensure that
you have programmes designed to cater to financial literacy needs of women.
Conclusion
In conclusion, it is evident that financial literacy is not just a matter of individual
empowerment but a critical component of inclusive growth and societal development.
Hence, it is imperative that we continue to prioritize efforts to enhance financial literacy
and foster financial inclusion.
The multi-faceted approach outlined in India's National Strategy for Financial Education
provides a comprehensive framework for advancing our objectives. Through targeted
initiatives and partnerships, we can equip people from all walks of life with the
knowledge and tools they need to make informed financial decisions and achieve
greater financial well-being.
As we celebrate our achievements, bridging the digital divide, ensuring ongoing
capacity building for counsellors, promoting greater collaboration among stakeholders,
and recognizing the crucial role of women in promoting financial literacy are areas that
require continued attention and investment.
By embracing these challenges as opportunities for innovation and collaboration, we
can unlock the transformative potential of financial literacy to create a more inclusive
and resilient society. Together, let us work towards a future where everyone has the
knowledge, skills, and opportunities to achieve their financial goals and aspirations.
Thank you.
1
https://www.livemint.com/industry/retail/young-indian-consumers-want-to-live-in-themoment-says-survey-11700737755534.html
2 Organisation for Economic Cooperation and Development has defined Financial
Literacy as 'A combination of financial awareness, knowledge, skills, attitudes and
behaviours necessary to make sound financial decisions and ultimately achieve
individual financial well-being
3 The National Centre for Financial Education (NCFE) is a 'not for profit' Company
jointly promoted by Reserve Bank of India, Securities and Exchange Board of India,
Insurance Regulatory and Development Authority of India and Pension Fund
Regulatory and Development Authority.
4 Source: https://old.ncfe.org.in/NFLAT (Last accessed on April 6, 2024).