everyday financial choices that many of us make. the lack of basic knowledge about financial products and services and their risk - return framework is one common instance of financial illiteracy that is widely observed. the greed for higher returns eventually culminates into a crisis involving larger number of retail investors. this basic lesson holds true not just for an individual investing his hard earned savings in financial products, but also for a bank or financial institution that manages public funds and channels them, either as investments or loans. thus, appreciation of various aspects of financial literacy and how it impacts our lives holds the key to prudent financial planning and welfare maximisation, both - at the individual level and for the society as a whole. why is financial literacy necessary? i, now, come to the second question : why is financial literacy necessary? together with financial inclusion and consumer protection, financial literacy forms a triad, which is necessary for ensuring financial stability. not only do the three have a bearing on financial stability, they also have a strong interplay among each other, with each having a vital impact on the other. thus, financial literacy has significant relevance for financial inclusion and consumer protection. without financial literacy, we cannot expect to make major headway in either financial inclusion or consumer protection. financial inclusion, essentially, involves two elements, one of access and the other of awareness. it is a global issue, and the relative emphasis on the two elements varies from country to country. for developed countries with widespread financial infrastructure, the access to financial products / services is not a matter of concern. it is more of a financial literacy issue in that market players / consumers are required to be educated about the characteristics of the available financial products / services, including their risks and returns. in developing countries like india, however, the access to products itself is lacking. therefore, here, both the elements, i. e. access and awareness need to be emphasized, with improving access assuming greater priority. financial stability, as a policy objective, refers to the avoidance of financial crises as also to the ability of the financial system to limit, contain, and deal with the emergence of imbalances before they pose a threat to the economic processes. 1 the recent global financial crisis is a glaring example of how lack of financial literacy can impact financial stability. the genesis of the crisis was in the sale of inappropriate mortgage products to sub - prime borrowers, who did not understand the product characteristics. the crisis was also fanned by the creation of sc

awareness of basic financial products. some of the steps that have been taken by the reserve bank and other stakeholders to promote financial literacy in india are as under : • outreach visits by top 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 – a link on financial education in 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. • awareness – distributing pamphlets, comic books, enacting plays and skits, arranging stalls in local fairs, exhibitions, participation in information / literacy programmes organized by press. books on financial planning for students and new professionals have also been released. • financial literacy centres ( flcs ) have been opened by various banks with focus on the spread of financial literacy, to create awareness about financial products and provision of counseling facilities for customers of banks. there were 575 flcs in the country as on september 30, 2012. bis central bankers ’ speeches • conducting town hall events across the country, including in tier ii and smaller cities, bringing together commercial banks and other stakeholders. • newsibition on mint road milestones has become the focal point for financial literacy activities with all activities relating to financial literacy coalescing at a common forum at each centre • setting up of a monetary museum by rbi to create awareness about money and banking among general public and spread knowledge about the history of money. • use of mobile financial literacy vans by banks in the north eastern states • awareness programmes on various government sponsored self employment schemes involving bank loans and subsidy by government agencies like kvic, dics and sc / st corporations. • mass media campaign tie ups with educational institutes, financial awareness workshops / help lines, books, pamphlets and publications on financial literacy by ngos, financial market players, etc. • national and state level rural livelihood missions have large number of field functionaries for proper handholding support to large number of self help groups. • large number of websites / portals of banks / state level bankers committees disseminating information on banking services • conduct of financial literacy programmes by rural self employment training institutes in line with the “ catch them young ” strategy for our financial education initiatives, the reserve bank launched the rbi