##hinasi, garry ( 2004 ), “ defining financial stability ”, imf working paper, wp / 04 / 187. bis central bankers ’ speeches sophisticated financial products by seemingly expert market participants, without understanding the underlying risks involved. ben bernanke, chairman, board of governors of the federal reserve system, remarked “ in light of the problems that have arisen in the subprime mortgage market, we are reminded of how critically important it is for individuals to become financially literate at an early age so that they are better prepared to make decisions and navigate an increasingly complex financial marketplace ”. 2 as already noted, financial literacy involves imparting knowledge about the risk and return of financial products to the users and providers of these products. it is this knowledge that helps in containing risks and maintaining stability in the financial system. i would like to argue that with knowledge, financial market players are expected to control their avarice for higher returns, keeping in view their inherent risk taking abilities. financial literacy is an essential pre - requisite for ensuring consumer protection. the low levels of transparency and the consequent inability of consumers in identifying and understanding the fine - print from a large volume of information leads to an information asymmetry between the financial intermediary and the consumer. in this context, financial education can greatly help the consumers to narrow this information divide. besides, knowledge about the existence of an effective grievance redress mechanism is essential for gaining the confidence of the unbanked population and overcoming apprehensions they may have about joining, what would appear to be a complex and unfriendly financial marketplace. for the population group that would have newly entered into the formal financial system through our financial inclusion initiatives, awareness about the consumer protection mechanism is critical as any unsavory experience could result in them being permanently lost to the financial system. who needs to be financially literate and in what respect? this brings me to the third question of who needs to be financially literate. i shall argue here that everyone associated with the financial system needs to be financially literate. this includes all users of financial services, be it the financially excluded resource - poor, the lower and middle income groups or the high net worth individuals ; the providers of services ; and even the policy makers and the regulators. for the resource - poor population, which operates at the margin, vulnerability can be acute due to constant financial pressures. household cash management can be daunting under difficult circumstances, with few resources

is to be followed by invitation of and consideration of inputs and feedback from relevant public and private sector organizations to enhance the sense of involvement and to build confidence. such a participative and consultative approach is advocated to secure a convergence of viewpoints and, hence, favorable public disposition towards the necessity of change. in sum, the process in india is an exercise that aims at understanding and comprehending various standards and codes in terms of rationale, technical complexities, institutional and legal requirements and the immediacy and relevance at the present stage of development and institutional structure. second, it is intended to result in getting a fair view of the country ’ s status with reference to standards. third, this would enable getting an idea about the necessary steps required to move closer to the adherence of standards and codes. fourthly, it would sensitise the regulatory authorities, agencies and institutions about the priority areas of action. conclusion in conclusion, i would like to quote andrew crockett from a recent imf - world bank jointly sponsored conference on international standards and codes ( march 2001 ) : " therefore, although setting high - quality standards is generally acknowledged to be a good thing, more work needs to be done on finding the best way to get there. " thank you.