K C Chakrabarty: India-OECD-World Bank regional conference on
"Financial education"
Welcome address by Dr K C Chakrabarty, Deputy Governor of the Reserve Bank of India, at
the India-OECD-World Bank Regional Conference on "Financial education", New Delhi,
4 March 2013.
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1. Dr. D. Subbarao, Governor, Reserve Bank of India; Mr. Onno Ruhl, Country Director, the
World Bank; Ambassador Richard Boucher, Deputy Secretary General, OECD; delegates
from the OECD, the World Bank and from countries across the world; colleagues from
Reserve Bank of India, other regulatory bodies and agencies involved in disseminating
financial education in India; ladies and gentlemen. It is my proud privilege to welcome you all
to India's capital city of New Delhi, a city of rich cultural and historical traditions, on the
occasion of this Regional Conference on Financial Education jointly organized by RBI, OECD
and the World Bank. As you might be aware, this conference is a part of a series of events
organized to disseminate information about the activities of the Russia/OECD/World Bank
Trust Fund on Financial Literacy and Education. Two other conferences in this series were
held recently in Cartagena and Nairobi. We at the Reserve Bank of India, are indeed very
proud to co-host this landmark conference, as it brings together all key stakeholders who are
central to India's crusade for achieving universal financial literacy. We believe this
conference provides an ideal platform, not only for us, but also for delegates from other
jurisdictions in particular, the Asia Pacific Region, to exchange views and learn from the
experiences of peers. We are also very happy and grateful, to have the World Bank and the
OECD as partners for this conference; two organizations which have made immense
contribution to spreading financial literacy and leveraging the financial systems to improve
the quality of lives of the marginalized groups across the world.
2. Over the next three days, the participants can look forward to stimulating and enriching
deliberations involving global experts having rich and varied practical experiences and learn
from their experiences of implementation of financial literacy initiatives in different parts of the
world. The conference sessions have been structured with focus on all the important pieces
which constitute the jigsaw of financial education. For instance, keeping in view the
importance of a well-articulated national level framework for financial education, an
interactive panel discussion on experiences in developing National Strategy documents for
Financial Education, has been planned. Further, in view of the need for assessing existing
financial literacy levels in order to identify priority areas while rolling out a National level
strategy, the conference includes a session dedicated to use of surveys for evaluating
financial literacy levels and ground level feedback from such measurement exercises. The
conference also seeks to emphasize on certain focus groups such as the youth and women
with separate panel discussions dedicated to these groups. All sessions have been
structured to involve sharing of experience by implementation experts from across
jurisdictions and would encourage free participation by all delegates, in order to optimize the
learning experience.
Need for financial education/literacy
3. Having given a brief outline of the Conference let me briefly touch upon the theme of the
Conference. Over the past few years, particularly in the aftermath of the global financial
crisis, the importance of Financial Education and Financial Literacy has come to be widely
acknowledged. This recognition has led countries to initiate programmes to disseminate
financial literacy among its citizens. As the OECD's definition of financial literacy indicates, it
is "a combination of financial awareness, knowledge, skills, attitude and behaviours
necessary to make sound financial decisions and ultimately achieve individual financial
wellbeing". I would argue that financial literacy is not only important for financial well-being of
the masses; it is also a sine qua non for the economic well-being of the nation as a whole.
4. Financial Illiteracy is not limited to the poor or to the less developed economies alone, it
pervades all levels of society and economic strata. Only the manifestation of financial
illiteracy varies depending upon the stage of development of the economy, and within the
same country, upon the economic profile of the individual. I am a firm believer that everyone
associated with the financial system needs to be financially literate. This includes the users
of financial services; the providers of services; and even the policy makers and the
regulators. For countries which successfully roll out financial education programmes, the
benefits are significant:
For the individual...
5. At an individual level, financial literacy/education is important because it helps in building
financial capability. It makes people better informed, educated and more confident, able to
take greater control of their financial affairs and to fully harness the benefits of accessing the
formal financial system. People who understand their financial circumstances are more likely
to make sensible choices and ensure adequate provision for their future. They are more
likely to have an appropriate level of insurance and reach retirement age with comfortable
pension plans. They won't pay more interest than they need to when borrowing, or settle for
less than they should when saving. People with basic financial awareness would understand
risk return trade-off and take better investment decisions, thereby being less vulnerable to
frauds and dubious schemes. Financial education can help reduce levels of debt, poverty,
repossessions, stress, illness and even crime. In sum, financial education improves the
quality of people's lives and financial affairs and provides them peace of mind, by instilling in
them a sense of confidence and security about matters of money.
For the macro economy....
6. From a macro perspective also, financial literacy/ education has important implications.
Financial Literacy, together with Financial Inclusion and Consumer Protection form a triad
which, collectively, has an important bearing on Financial Stability. The three legs of the triad
have strong inter-linkages, with each element having a vital bearing on the others. The
absence of any one would make it difficult to attain the remaining goals. Financial Literacy
aids financial inclusion initiatives as it creates awareness about the benefits of connecting
with the formal financial system and hence, creates demand for financial products. Financial
literacy supports consumer protection as it helps consumers better understand the features
and risks inherent in financial products, thereby reducing the risk of mis-selling. It also
generates awareness and willingness to approach the grievance redressal system available,
in case of disputes.
7. At a macroeconomic level, the cost of financial illiteracy is significant and is manifested
through scourges such as unemployment, poverty, high personal indebtedness and financial
exploitation through mis-selling. It results in avoidable leakages and wastages, which any
resource-scarce country can ill-afford. The savings habit, which can be inculcated through
financial education, can help channelize household savings into productive activities, thereby
supporting economic growth. The increased demand for financial services, created as an
outcome of financial education efforts, can help bring depth and diversification to the financial
markets.
How are we doing in India?
8. In India, financial education has been identified as a policy priority and a massive effort
involving the Government, various financial sector regulators, financial institutions and civil
society is underway. The Financial Stability and Development Council (FSDC), which is
chaired by the Union Finance Minister, is mandated, inter alia to focus on spread of financial
inclusion and financial literacy. Under the aegis of the FSDC, the draft National Strategy for
Financial Education (NSFE) for India has been prepared. Further, we are focusing on
financial education for school children and are involving various national curriculum setting
bodies in order to seamlessly integrate financial literacy material into the existing course
curriculum, without making it burdensome for the children. Over the course of this
conference, my colleagues from the Reserve Bank and other agencies will be presenting the
nuances of India's push towards universal financial literacy. We look forward to your views
and suggestions on where we can do it differently, and better.
Conclusion
9. As I mentioned before, Financial Illiteracy is a global problem and the challenge before us
is enormous. It calls for a collaborative partnership involving all stakeholders and all
countries. While the experiences in individual jurisdictions would vary, there are important
learning points that we can pick up from each country's journey. I hope this conference
succeeds in valuable sharing of knowledge and experience among such a wide array of
experts from across the world. I do believe that with our collective efforts towards universal
financial education, individuals and institutions would be empowered to make informed
financial choices and in the process, the global financial marketplace would become a more
stable arena, much less vulnerable to financial crisis, such as the one we are facing today.
That is the ultimate goal of building Financial Capability in any society!
I wish the conference great success and hope that you have extremely enriching
deliberations over the course of the Conference. I once again welcome you all and wish you
a pleasant and enjoyable stay in New Delhi. Thank you!