National Strategy for Financial Education 2.0

When it comes to creating an efficient economy, financial stability and financial literacy are the two sides of the same coin. In this context, the Government of India and the Reserve Bank of India (RBI) have begun to include both financial literacy and financial education in their development agenda. On 20 August 2020, the RBI released a revised National Strategy for Financial Education (NSFE) for 2020–25, the second one after the 2013–18 NSFE. According to the NSFE, “Financial literacy supports the pursuit of financial inclusion by empowering the customers to make informed choices leading to their financial well-being.” It envisages achieving this through a “5C strategy” of content, capacity, community, communication, and collaboration for promoting financial education in the country. The aim is to develop content for schools, colleges and training establishments, develop capacity among financial services intermediaries, employ community participation through an appropriate communication strategy, and lastly, enhance collaboration among various stakeholders. The strategic objectives include skilling on financial education, encouraging savings behaviour, developing credit discipline, improved usage of digital financial services and creating awareness on avenues for grievance redressal. Encouraging entrepreneurs to avail credit from the formal financial institutions, and managing various life-stage risks through insurance cover and pension plans are the other critical objectives laid down in the new NSFE.

Financial literacy in India has consistently been low compared to other countries of the world. According to a 2014 global survey by Standard & Poor’s Financial Services LLC, nearly 76% of the adult population in India does not understand even the basic financial concepts. According to the 2019 IndiaSpend report, 75% of the country’s population does not have any form of life insurance. The same report quotes that an average Indian is left with only 8% of what may be required to protect their family from financial shock in case of the death of an earning member. Financial illiteracy creates a burden on the nation as it needs to spend more on creating financial security for its citizens. It also deprives the nation of its capital funds required for other activities (for example, infrastructure development).