Deepali Pant Joshi: Moving financial capability forward - innovation
scale and impact
Intervention by Dr Deepali Pant Joshi, Executive Director of the Reserve Bank of India, at the
10th Anniversary of the Citi-FT Financial Education Summit, Hong Kong, 7 December 2013.
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Inputs from Sushma Vij DGM and Geetha Nair AGM are gratefully acknowledged.
Dear friends , I am honoured to be here today at the tenth anniversary of the summit on
financial literacy and thank Citi and FT for having me here, and of course, my friend David
Pilling for the opportunity to share the India experience. David we are out of the woods! I
confirm this. As all the people in this room know, financial literacy has emerged as a focus
area for policy makers all across the globe, in the wake of the global financial crisis.
Financial literacy means different things to different people. We in India understand financial
literacy differently depending upon the underlying objective to build greater financial inclusion
through financial literacy, for maximising welfare, both individually and for society generally.
Although, we have progressively promoted financial literacy, many challenges remain. These
include (i) the large excluded sections many of whom may be illiterates especially in the rural
or remote areas with difficult physical access; (ii) the need for better supervisory capacity
among financial regulators; and (iii) addressing the pervasive "informal" markets that handle
lending, insurance, and remittances for those unable to tap into the formal system.
This is a tenth anniversary of the summit. In these ten years, India has seen significant
changes. As you know, we have a large banking system which comprises besides Public
Sector Banks, Private Sector Banks, Regional Rural banks and Cooperatives with significant
penetrative outreach. Well, these banks are now all on interoperable Core Banking System
platforms which enables us to significantly leverage technology to leapfrog the barriers of
geography and distance and tackle issues of voluntary access. We have significantly
liberalised our rules on bank branching, we have enabled the use of Banking
Correspondents (BCs), some of the mobile companies, such as, AIRTEL and Vodafone,
partner with banks as BCs. We have also liberalised the dreaded KYC norms to make it
easier for a poor person or a migrant to open a bank account. We have enabled E-KYC. Our
unique identity card, the Aadhar, is enabling digitisation of social benefit transfers which will
also lead to steady revenue streams for service providers and we have a big push on
building financial capability.
Role of financial education in India
Greater financial access combined with financial education creates financially responsible
citizens. This mix of financial access and financial education provides a foundation for
appropriate market conduct and prudential regulation. Improving individuals' financial
behaviour is a long-term policy priority. Financial education needs to commence early and
continue through adulthood.
In order to achieve the objective of financial inclusion, our financial literacy efforts are
primarily directed towards dissemination of simple messages of financial prudence, in
vernacular languages, through large awareness campaigns across the country combined
with vigorous roll out of financial inclusion plans by banks, insurance and pension funds, and
others. It is important to note that being literate is not a necessary prerequisite for attaining
financial literacy as the basic financial messages can be conveyed through various alternate
means without relying on written inputs. Some of the basic messages we seek to deliver
through our financial literacy drives are:
•
Why save
•
Why save regularly and consistently
• Why save with banks
•
Why borrow within Limits
•
Why borrow from banks
•
Why borrow for income generating purposes
•
Why repay loans
• Why repay loans in time
•
Why do you need insurance
•
Why you will need regular stream of income post working life-pension
•
Why you should keep money aside regularly and consistently during your earning
life for pension in old age
•
What is interest? How moneylenders charge very high interest rates?
Since the challenge in India is to link a larger number of financially excluded people to the
formal financial system, the focus of our strategy at the base level is to create awareness of
basic financial products. Some of the steps that have been taken by the Reserve Bank of
India and other stakeholders to promote financial literacy in India are:
Outreach visits by Senior Executives of Reserve Bank of India to remote villages: The
objective of these visits is to understand the ground level position, spread awareness about
benefits of being connected to the formal financial system and disseminate information about
the functioning of RBI.
RBI website - We have created a link for Financial Education on the RBI website, containing
material in English, Hindi and 11 vernacular languages, which includes comic books on
money and banking for children, films, messages on financial planning, games on financial
education and link for accessing the Banking Ombudsman Scheme for customer grievance
redress. Some of the popular comic books brought out by the department of communication
are Money Kumar, Raju and the Money Tree and some films which very simply impart
messages on financial education to children. The department of communication also hosts
groups of school children and explains the working of RBI to them and imparts simple
financial concepts to them.
In line with the "catch them young" strategy for our financial education
Inter School Quiz:
initiatives, the Reserve Bank launched the RBIQ, an all India inter school quiz competition, in
2012. The quiz seeks to be an effective platform for disseminating financial education by
creating awareness and sensitisation about the history and role of the Reserve Bank, about
banking and finance, economics, current affairs, etc., besides seeking to build a "connect"
between the Reserve Bank and the young student community enrolled in schools across the
country.
Financial Literacy Centres (FLCs) have been opened by various banks with a sharp focus
on the spread of Financial Literacy, to create awareness about financial products and
provision of counselling facilities for customers of banks. There are more than 800 FLCs in
the country as on September 30, 2013. Use of mobile Financial Literacy vans is done by
banks in the difficult terrains.
Town Hall events: These are conducted across the country, including in Tier II and smaller
cities, bringing together commercial banks and other stakeholders.
Mass media campaign are launched through tie ups with educational institutes, financial
awareness workshops/helplines, books, pamphlets and publications on financial literacy by
NGOs, financial market players, etc.
is attempted through the Conduct of Financial Literacy programs by Rural
Capacity Building
Self Employment Training Institutes.
Awareness campaigns: By distributing pamphlets, comic books, enacting plays and skits,
arranging stalls in local fairs, exhibitions, participating in information/literacy programs
organised by Press. Similarly, in these times of financial uncertainty and risk, the importance
of educating people about the advantages of Life and Non-life insurance products is
important.
Institutional framework in India for spreading financial education
Now coming to the institutional framework created in India for the spread of financial literacy,
I would like to mention that we are among the very few countries where an apex body
namely the Financial Stability and Development Council (FSDC) chaired by the Union
Finance Minister with heads of all financial sector regulators as members has been
mandated, inter alia to focus on spread of financial inclusion and financial literacy. So we
have a buy in of our strategies at the highest levels Under the aegis of the FSDC, a National
Strategy for Financial Education (NSFE) for India has been prepared. The Strategy
envisages ways of creating awareness and educating consumers on access to financial
services; availability of various types of products and their features; changing attitudes to
translate knowledge into responsible financial behaviour; and enabling consumers of
financial services understand their rights and obligations. The Strategy necessitates active
involvement of individuals, financial sector regulators, educational institutions, NGOs,
financial sector entities, multilateral international players and the Governments both at
Centre and State levels.
National strategy for financial education
Our National Strategy envisages a time frame of five years for its massive financial education
campaign and aims at establishing initial contact with 500 million adults, educating them on
key saving, protection and investment related products so that they are empowered to take
prudent financial decisions. It also seeks to create awareness about the consumer protection
and grievances redress machinery available in the country. Basic financial education is
aimed to be included in school curricula up to senior secondary level. This is based upon the
premise that the most effective way is to weave financial education into the normal content of
curriculum. Accordingly, we are engaging with the curriculum setting bodies like the National
Council of Educational Research and Training (NCERT), Education Boards like the Central
Board for Secondary Education (CBSE), Central and State Governments to try and embed
such concepts in the school curriculum.
One of the objectives of the NSFE is to standardise the messages that various stakeholders
seek to disseminate through their financial education initiatives. The NSFE document
identifies certain simple messages I mentioned earlier in my speech such as why save; why
invest; why insure; why save with banks; why borrow within limits; why repay loans in time;
why borrow for income generating purposes, what is interest and how moneylenders charge
very high interest rates, etc. It is a well-recognised fact that standardisation will help in
ensuring consistency in the messages which reach the target audience from various sources
and making them more focused and powerful.
Integrated approach - financial inclusion through financial education
We have already done some work in this direction. We have designed a mass scale
Financial Literacy Program to integrate the financially excluded population with low level of
income and low literacy level with the formal financial system. The program is run through
our Financial Literacy Centres set up by banks, nearly 800 in numbers. About 40000 rural
branches of the banks would scale up these efforts by conducting one outdoor literacy camp
in a month. In addition to this we leverage the infrastructure created at the state level,
comprising of State Level Bankers Committee (SLBC) at the Apex which is ably supported by
the Lead District Managers (LDMs) at the District level. Financial Literacy Centres organise
Outdoor Literacy camps which are spread over a period of three months and delivered in
three phases wherein along with creating awareness, accounts are also opened in the
Literacy camps. The program has been received well on the ground as an integrated
approach of financial inclusion through creating awareness and providing access
simultaneously.
In order to ensure consistency in the messages reaching the target audience of financially
excluded people during the Financial Literacy Camps, we have issued comprehensive
Financial Literacy Material containing a financial literacy Guide, Financial Diary and a set of
16 posters which contain very simple messages of How To Save. For instance, we are a
nation of tea drinkers. So we just explain graphically that everyone can drink two cups of tea
less! Walk into a bank walk into prosperity and so on and so forth.
Conclusion
While it is important to begin teaching financial skills at school level, achieving and
maintaining financial know-how is a lifelong undertaking. The types of financial decisions that
people have to make vary through the course of their lives, and thus we are trying to ensure
that access to financial education is readily available at all stages of life with the help of other
stakeholders. Moreover, relevant, accurate, and reliable financial information must be readily
available to consumers at the time they are making their decisions.
Through financial education, we try to provide individuals with the knowledge and skills they
need to make better choices about finances. Through consumer protection, we can
safeguard individuals against harmful practices and bad information that lead to poor
financial choices. Accomplishing these two goals we believe will result in economic
empowerment for all concerned.
While a number of measures have been taken and are being taken in India, given the
enormity of the task, a lot of ground still needs to be covered. Apart from the Government
and the regulatory bodies, there is a need for involving the civil society and all other
stakeholders in spreading financial literacy. The widespread existence of financial illiteracy
indicates that we need to do a lot more. There is a lot of skepticism on whether Financial
literacy actually leads to changes in behaviour and some recent papers which suggest that
this does not and it is the classic conundrum of being able to take the horse to the water but
not being able to make him drink! Bilal Zia our world Bank researcher and colleague and I
discussed this thoroughly at dinner and we concluded that the trick vests in the right delivery
model so targeted interventions do work.
I once again thank the organisers of this Conference for providing me the opportunity to
share with you the Indian experience and some of the work we have been doing to move
financial capability forward Innovation scale and Impact of the process. We are model
neutral. We do believe that technology has an important role to play we are seriously looking
at innovative models. Summits, such as, the present one, are important in generating new
ideas leading clarity of thought and definition of purpose among the various stakeholders. I
do believe that the summit offers a special opportunity to learn from mutual experience and
sincerely hope that with our collective efforts financial literacy would be widely disseminated.
The common man would be empowered to take informed financial decisions and in the
process, the global financial marketplace would become a more stable arena.
I wish the Summit great success and hope that you have extremely enriching deliberations
over the course of the Summit and hope these processes of engagement continue to the
building of a better world.
Thank You Jeff Wagner of FT, Stefen Bird CEO Asia Pacific Citi and David Pilling Asia editor
Financial Times for having me here this beautiful afternoon and thanks for the patient
hearing.