”. i am happy to note that the three organizations have come together to host today ’ s seminar and hope that the partnership yields fruitful results for our financial inclusion / financial literacy initiatives. i am happy to note that at the behest of undp and nabard, microsave has conducted a financial literacy assessment survey to assess the current status of financial literacy in the un focused states and to gather relevant inputs from other similar programs operating nationally / internationally. it is, indeed, very important not only to work hard, but also to have periodic appraisals of the performance, as it helps one to refocus, reorient and undertake mid - course correction, which is so very vital to the achievement of the ultimate objective. i am sure the insight gained from this exercise would provide valuable guidance to undp and help them in further streamlining the existing programs and taking it further, both – in terms of its penetration across the targeted states and the impact it has on the financial behavior of the beneficiaries. in my address today, i shall answer four basic questions about financial literacy : • what is implied by the concept of financial literacy? • why is financial literacy necessary? • who all need to be made financially literate and in what aspects? bis central bankers ’ speeches • and finally, how to spread financial literacy? what is implied by the concept of financial literacy? let me begin by answering the first question. financial literacy is not a new term to all of us present here. while we have heard a number of definitions of financial literacy, i would use the one given by oecd, which defines it as “ a combination of financial awareness, knowledge, skills, attitude and behaviours necessary to make sound financial decisions and ultimately achieve individual financial wellbeing. ” financial literacy is expected to impart the wherewithal to make ordinary individuals into informed and questioning users of financial services. it is not just about markets and investing, but also about saving, budgeting, financial planning, basics of banking and most importantly, about being “ financially smart ”. financial literacy is a complex concept, and it is important to understand its full import. in fact, as a society, we are yet to fully recognise the need and potential of financial literacy. as i would explain subsequently, financial illiteracy permeates across all levels of society and economic strata. the nature of illiteracy and its manifestations may vary, but it gets reflected in the

alignment with central bank practice in putting the focus squarely on interest rate rules. much monetary policy analysis in academia had considered rules in which the policy instrument was a monetary or reserves aggregate. as i expect most of you know, this was a matter see mccallum ( 1993, p. 39 ). see taylor ( 1993 ). see mccallum ( 1999b, p. 16 ). - 9on which mccallum ’ s research had two branches. on the one hand, the rule that mccallum himself advanced in a number of papers in the 1980s and 1990s was a rule for the monetary base and was designed to improve on the k percent monetary - growth rule by introducing countercyclical responses and allowing for shifts in money demand. 15 but, on the other hand, he also produced fundamental analytical work showing that interest rate rules were viable, with his 1981 paper establishing that such rules could provide an anchor on the economy ’ s nominal variables. 16 consequently, mccallum was receptive when the taylor rule became a baseline reaction function in monetary policy analysis. central banks were likewise receptive to the analysis of interest rate rules — and the taylor rule in particular. their favorable reaction was driven by two factors. first, after the experience of monetary targeting, central banks were disillusioned with policy analysis that was focused on monetary aggregates. second, interest rate rules were policy relevant because these rules were expressed in terms of the short - term interest rate on which central banks actually made decisions. as mccallum put it, “ the fact is that actual central banks in industrial countries conduct monetary policy in a manner that is much more accurately depicted by writing [ the interest rate ] as the instrument. ” 17 reflecting this reality, all the rules considered in our monetary policy report are interest rate rules. 18 see, for example, mccallum ( 1987, 1993, 1999a ). this work was in response to the negative judgment made on interest rate rules by sargent and wallace ( 1975 ). see woodford ( 2003, p. 45 ) and cochrane ( 2023, p. 416 ) for discussions of mccallum ’ s result in the context of dynamic general equilibrium analysis. see mccallum ( 1999b, p. 24 ). in addition, interest rate rules, largely consisting of variants of the taylor rule, have been found useful in characterizing earlier eras of u. s. monetary policy. see clarida, gali, and gertler ( 2000 ). - 10 monetary