• The Reserve Bank of India (RBI) and the National Centre for Financial Education (NCFE) have launched a nationwide campaign to enhance financial literacy across India. 

• These initiatives aim to empower diverse segments of the population with the knowledge and skills needed to manage their finances effectively and safeguard against financial fraud.

• The National Centre for Financial Education (NCFE) has been set up as a Section (8) company under Companies Act, 2013 to undertake basic financial education and to develop suitable content for increasing financial literacy among the masses in the country. 

• NCFE prepares appropriate financial literature for target-based audiences on financial markets and financial digital modes for improving financial literacy so as to improve their knowledge, understanding, skills and competence in finance.

Key Initiatives:

1) Financial Literacy Centres (FLCs):

• Guidelines have been established for setting up FLCs by Lead Banks.

• FLCs conduct special camps targeting various groups to promote financial literacy.

2) Public Awareness Campaigns:

• ‘RBI Kehta Hai’: A multimedia, multilingual campaign to educate the public on safe banking practices.

• Mass Media Campaigns: Disseminate essential financial awareness messages to all age groups.

3) Financial Awareness Messages (FAME):

• RBI has developed the FAME booklet, providing standardised financial awareness content tailored for different target groups, including senior citizens.

4) National Strategy for Financial Education (NSFE):

• Implemented by NCFE in collaboration with financial sector regulators.

• Aims to equip individuals with the knowledge, skills, and behavior necessary for effective financial management and future planning.

5) Financial Education Programmes:

• NCFE conducts programmes targeting audiences below 18 years and above 60 years.

• In the last three years, 54 financial literacy programmes were conducted in northeast states, focusing on concepts like grievance redressal and fraud prevention.

The importance of financial inclusion and financial literacy

• Strengthening financial inclusion in the country has been one of the important developmental agendas of both the government of India and the four financial sector regulators — the RBI, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA). Financial inclusion is a national priority as it is an enabler for inclusive growth. 

• In the Indian context, financial inclusion is the process of ensuring access to appropriate financial products and services needed by vulnerable groups, such as weaker sections and low income groups, at an affordable cost in a fair and transparent manner by mainstream institutional players. 

• Financial inclusion provides an avenue to the poor for integrating with the formal financial system. 

• Financial literacy supports the pursuit of financial inclusion by empowering the customers to make informed choices leading to their financial well-being.

• Financial literacy is defined as a combination of financial awareness, knowledge, skills, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being. 

• Financial education, on the other hand is defined as the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and through information, instruction and objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help and to take other effective actions to improve their financial well-being.

• The terms financial education and financial literacy are related concepts, but not the same. People achieve financial literacy through the process of financial education. The achievement of financial literacy empowers the users to make sound financial decisions which result in financial well-being of the individual.

• While financial inclusion is essentially a supply-side intervention, financial education is a demand side intervention. Apart from these forces operating on the demand side and supply side, there are also other enabling factors on the ground. 

• Achievement of financial well-being of citizens of any country depends on how well these factors and forces are integrated and the extent to which these work in cohesion.

• Financial literacy develops confidence, knowledge and skills to manage financial products and services enabling them to have more control of their present and future circumstances.

• Financial literacy will help in protecting society and individuals against exploitative financial schemes and exorbitant interest rate charged by moneylenders.

• Financial education will help to avoid over-indebtedness, improve quality of services and make wise financial decisions.

(The author is a trainer for Civil Services aspirants.)