Financial Literacy in India: Government Schemes and Initiatives

Key Takeaways

• Financial literacy is the ability to understand and apply various financial skills, including money management, budgeting, investing, and financial planning, crucial for building a secure financial future.
• Financial literacy is essential for informed decision-making, avoiding debt traps, and leveraging investment opportunities, with the potential to contribute to economic growth and reduce income inequality.
• The Indian government has launched several initiatives like Pradhan Mantri Jan Dhan Yojana (PMJDY) and National Centre for Financial Education (NCFE) to promote financial inclusion and literacy across the country.
• The Reserve Bank of India (RBI) has introduced initiatives like the National Strategy for Financial Education (NSFE) and Financial Literacy Centres (FLCs) to enhance financial awareness, especially in rural and semi-urban areas.
• While government and RBI initiatives are crucial, programs like Invest4Edu's Elevate offer practical financial education and mentorship, bridging the gap between theoretical knowledge and real-world application.

In a rapidly evolving economy like India, financial literacy has become increasingly important. As financial products and services become more complex, the need for a strong foundation in financial management is crucial. However, financial literacy in India remains a challenge, particularly among the youth.

According to a survey by the National Centre for Financial Education (NCFE) only 27% of Indians are financially literate. This lack of financial knowledge can lead to poor financial decisions, such as falling into debt traps or missing out on important investment opportunities. Recognizing this, the government and the Reserve Bank of India (RBI) have launched various initiatives to promote financial education and awareness. This article explores the concept of financial literacy, its importance, and the key initiatives by the government, RBI, and other institutions aimed at improving financial literacy in India.

What is Financial Literacy?

Financial literacy refers to the ability to understand and effectively use various financial skills, including personal financial management, budgeting, investing, and financial planning. It is the foundation upon which individuals can build a secure financial future, enabling them to make informed decisions about their money. Financial literacy is not just about managing expenses and saving; it encompasses a broader understanding of financial products, services, and the risks and opportunities they present.

Importance of Financial Literacy and Awareness

Financial literacy is critical for several reasons:

• Informed Decision-Making: It empowers individuals to make informed financial decisions, from budgeting to investing and retirement planning.
• Avoiding Debt Traps: A lack of financial knowledge can lead to poor financial decisions, such as falling into debt traps or missing out on important investment opportunities.
• Economic Growth: Financially literate individuals are more likely to save and invest, contributing to capital formation and overall economic growth.
• Social Inclusion: Financial education promotes social inclusion by providing underserved communities with the knowledge and tools to participate in the formal financial system.

Government of India Initiatives for Financial Literacy and Financial Inclusion

Recognizing the importance of financial literacy, the Indian government have launched several initiatives to promote financial education aimed at different sections of the society. The main of these initiatives is to include every person in financial development programs, create awareness, and help them have access to financial resources.

National Centre for Financial Education

With a vision to have a financially aware and empowered India, National Centre for Financial Education (NCFE) promotes Financial Education across India for all sections of the population as per the National strategy for Financial Education of Financial Stability and Development Council. NCFE is a Section 8 (Not for Profit) Company promoted by Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA).

You can get more information by visiting the website: https://ncfe.org.in/

Financial Inclusion Schemes by the Indian Government

The Pradhan Mantri Jan Dhan Yojana (PMJDY) is a national mission aimed at financial inclusion by providing affordable access to financial services, including bank accounts, credit, insurance, and pensions, to the unbanked population. By opening over 40 crore bank accounts, the scheme has significantly promoted financial inclusion and reduced reliance on cash transactions.

You can visit https://pmjdy.gov.in/ for more information.

Retirement Planning Schemes by the Indian Government

Atal Pension Yojana (APY)

APY is a government-backed pension scheme aimed at the unorganized sector. It encourages workers to save for their retirement by offering a guaranteed minimum pension. The scheme also promotes financial literacy by encouraging individuals to plan for their financial future.

National Pension System (NPS)

NPS is a voluntary retirement savings scheme aimed at encouraging citizens to save for retirement. The scheme promotes financial awareness by educating participants about retirement planning and investment options.

Insurance Schemes by the Indian Government

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

PMJJBY is an insurance scheme that offers life insurance cover for death due to any reason. It is a one-year cover, renewable from year to year. The scheme is offered by banks/post offices and administered through life insurance companies. All individuals who are account holders of participating banks/ post office in the age group of 18 to 50 years are entitled to join. Premium payable is just ₹ 436/- per annum per subscriber.

Pradhan Mantri Suraksha Bima Yojana (PMSBY)

PMSBY encourages every citizen to get insurance access and coverage. The minimum annual premium for the scheme is Rs.20, and two types of insurance coverage are given to the subscriber - Accidental death or complete disability and partial disability insurance cover. The insurance cover for partial disability is up to Rs.1 lakh and for complete disability or death is Rs.2 lakh. By making insurance cover easy and affordable, PMSBY has made protection, an important part of financial empowerment, accessible to all.

RBI Initiatives for Financial Literacy

The Reserve Bank of India, the Indian central bank, too is committed to bring financial literacy and awareness to people. Being the top bank, RBI focusses its initiatives to develop safe financial practices, financial planning, and identification and prevention of financial frauds.

RBI Kehta Hai

Jankar Baniye, Satark Rahiye: the tagline say it all. RBI reaches out to customer through this campaign and constantly remids them about safe practices, and grievance redressal. With a focus on digital transactions, senior citizens, families, and general awareness, this initiative has generated tremendous awareness among people by using TV and digital media platforms.

In case you need further clarifications, please visit https://rbikehtahai.rbi.org.in/

Financial Literacy Centres (FLCs)

The RBI has established over 1,500 FLCs across India to provide free financial education, especially in rural and semi-urban areas. These centres offer financial counselling, debt management, and investment advice, helping bridge the financial literacy gap.

Financial Literacy Week

An annual event organized by the RBI, Financial Literacy Week focuses on spreading awareness about key financial concepts and products. The event includes workshops, seminars, and public outreach programs to promote financial education.

RBI’s Financial Education Microsite

The RBI has launched a dedicated financial education microsite that offers resources, tools, and information to help individuals improve their financial literacy. The website also includes specific sections for women, children, and young adults, making financial education accessible to diverse groups.

Project Financial Literacy

Project Financial Literacy is an initiative by the RBI aimed at disseminating information about basic banking concepts and services. The project targets various groups, including school children, college students, women, and senior citizens, through workshops, seminars, and campaigns.

Financial Literacy and Awareness Initiatives by Different Institutions

The regulatory authorities governing important financial sectors such as Stock Market, Insurance, Pension, and banks, they all do their part in spreading financial literacy in India. All these bodies have directed their efforts generating awareness about financial planning, regulations, and fraud prevention. Some of the initiatives taken by these authorities are:

Securities and Exchange Board of India (SEBI)

SEBI has launched a mobile app named Saa₹thi for investor education with a view to empowering investors with knowledge about the securities market. The app aims to create awareness among investors about the basic concepts of the securities market, KYC process, trading and settlement, mutual funds, recent market developments, and investor grievances redressal mechanism, etc. It is available in Hindi and English. The Android and iOS versions of the App can be downloaded from Play Store and App Store respectively.

Insurance Regulatory and Development Authority of India (IRDAI)

Since its inception, IRDAI has taken various initiatives in the area of financial literacy. It has mandated the insurers to have Board approved Insurance Awareness Policy with action plan for organizing various activities promoting consumer awareness on various aspects of insurance. IRDAI has also launched a Research Grant Scheme to have research and analysis to protect interest of policy holders. Additionally, the authority conducts regular awareness campaigns, seminars, surveys, and competitions for the general public.

Investor Education and Protection Fund Authority (IEPFA)

IEPFA, established under the Ministry of Corporate Affairs, focuses on promoting investor education and protecting investor interests. It conducts awareness programs and offers educational resources to help individuals make informed investment decisions. To reach out to citizens from all walks of life and create awareness about savings and investments IEPFA organises Investor Awareness Programms (IAP) through various partners. IAP aims to help citizens know about various concepts of savings and investments, various polices and schemes which are available in the market, and help them understand the benefit of saving, investment and capital formation or accumulation.

School Curriculum Integration

The National Education Policy (NEP) 2020 lists financial literacy as critical life skill, and covers it under ‘Adult Education and Lifelong Learning.’  While several schools on their own capacity have been teaching financial literacy, RBI and NCFE have come up with programs to integrate financial education into the school curriculum. One such initiative is Money Smart School Program (MSSP) developed by NCFE. This initiative provides unbiased financial education in schools for improving financial literacy which is an important life skill for the holistic development of each student. The program is based on two pillars: education and awareness, and aims to establish a sustainable financial literacy campaign that will empower an entire generation.

National Strategy for Financial Education 2020-25

The NSFE 2020-2025 is a strategic plan developed by the RBI in collaboration with various stakeholders to enhance financial literacy across India. It is based on the ‘5 C’ approach of the strategy which includes emphasis on the development of relevant Content in the curriculum in schools, colleges and training establishments, developing Capacity among intermediaries involved in providing financial services, leveraging the positive effect of Community-led model for financial literacy through appropriate Communication strategy, and, enhancing Collaboration among various stakeholders.

The complete pdf can be downloaded here.

Challenges in Financial Literacy Initiatives

While the government and RBI initiatives are commendable, they face several challenges:

• Not for the Young: The main aim of financial literacy is to develop awareness and good habits, and students are ideally a better fit to start. Apart from Money Smart School Program, other initiatives are aimed at adults and senior citizen.
• Theoretical and Distant: Many initiatives are primarily theoretical and do not provide practical, hands-on financial education. Also, media campaign are good for generating awareness but they do little to actually teach critical skills.
• Standalone Efforts: The initiatives often function in isolation, lacking integration and coordination with other programs.
• Limited Practical Application: The focus on theoretical knowledge limits the practical application of financial skills, particularly in real-world scenarios. National Centre for Financial Education aims to solve this problem but a cohesive strategy is yet to be emerged.
• No Job Creation: The initiatives are not directly aimed at generating jobs or equipping individuals with skills to enhance employability.

How Invest4Edu Elevate Program is Changing the Dynamics for the Youth

While the government and RBI initiatives are a step in the right direction, there is still a long way to go in terms of promoting financial literacy among India's youth. This is where Elevate Program from Invest4Edu comes in.

The Elevate Program is a comprehensive internship opportunity designed specifically for students and young professionals. The program aims to bridge the gap between academic knowledge and practical financial skills by providing participants with hands-on learning experiences and expert mentorship. This approach puts the intern a step ahead of the competition in the job market.

Through the Elevate Program, participants gain a deep understanding of various financial concepts, such as:

• Indian Stock Market
• Technical and Fundamental Analysis of Stocks
• Personal Finance Management
• Mutual Fund Investing
• Fixed Income Investments

What sets the Elevate Program apart from other financial literacy initiatives is its focus on practical learning. Participants get the opportunity to work on real-world projects, allowing them to apply their knowledge in a meaningful way. This hands-on approach helps participants develop critical thinking skills and gain confidence in their ability to manage money effectively.

Another key feature of the Elevate Program is its emphasis on mentorship. Participants receive guidance and support from industry experts who have years of experience in the financial sector. These mentors provide valuable insights and advice, helping participants navigate the complex world of finance with ease.

Conclusion

Financial literacy is a critical skill that everyone needs to navigate the complexities of today’s financial world. While the government and RBI have made significant strides in promoting financial education, there is still a long way to go. Practical programs like Invest4Edu’s Elevate are essential for bridging the gap between theoretical knowledge and real-world application, empowering individuals to make informed financial decisions and contribute to economic growth. As you continue your journey towards financial literacy, take advantage of the resources and opportunities available, and remember that the path to financial success starts with a solid understanding of money management.