Enhancing Financial Literacy and Inclusivity in India

Ensuring Last Mile Connectivity of Financial Resources

In order to make every citizen financially sound it is very important to ensure that financial resources reach to every corner of the country and the benefits are availed by everyone as well. Around 90% of Rural Households are estimated to have a savings account at an accredited financial institution according to a report by NABARD. The introduction of zero deposit accounts, several schemes like Kisan Credit Card, Jan Dhan Yojana along with the influx of small and micro financing banks have surely aggravated the process. But it has not seen reaching every household aimed at. 

Looking at various loopholes from our research, we came up with these following suggestions that could very much be feasible and further aggravate the last mile financial connectivity. Government can ensure that the benefits of several non-banking schemes are transferred to bank accounts in monetary forms wherever possible to encourage more opening of bank accounts. Campaigns do create an impact as we have seen through various ad campaigns in the past and thus the small regional banks can act as aggravators to the various campaigns launched by RBI and the government to the rural areas, and also provide financial counselling services in those areas.

 Enhancing Digital Adoption in Rural or Tribal Areas

The NCPI (National Payments Corporation of India) reported record yearly transactions worth Rs 75.6 lakh crore through UPI for the trailing 12-month period from February 2021 to January 2022. In terms of volumes, a total of 4,106 crore transactions were made in the same 12-month period. 

India is also the 2nd largest telecom subscriber in the world with more than a billion telecom subscribers. The total number of wireless subscribers across rural India was approximately 534 million [2]. Adding to it is the rapidly growing mobile phone market. The expansion of UPI across the various low tier and rural areas of the country through an already penetrated phone market which is also growing rapidly year on year, can help in digital adoption in the rural/ tribal areas of the country.

Promoting Financial Literacy Amongst Next Generation

The age wise financial literacy inclusion which is far less when compared to other nations, with ranging from 20% in the teens young adult population to 30% in the late 20s and early 30s [3], the primary reason can be lack of awareness about the need for financial literacy. There is no proper curriculum to address the same.

Educational bodies like CBSE, NCERT should include a curriculum for Financial Literacy especially Personal Finance in the already existing school curriculum. Prominent financial bodies such as the RBI, IRDAI, NCPI, should collaborate with educational bodies for designing the curriculum.

Several recommendations have been given previously on this aspect but due implementation is yet to be made, hopefully the New Education Policy can make a change to that.

Evaluating Impact of Digital Learning Programs

Since we discussed the integration of financial literacy in the course curriculum of various schools and institutions itself, the schools and institutions can conduct tests, distribute assignments and ask for projects in the same and evaluate them. Accordingly, students will be taught further based on their performances.

Government, along with financial bodies, can organize several events and competitions where through participation, data can be collected analysing the impact of various programs, how much fruitful they have been and how widely they have been able to reach.

Private entities through their technology and resources can organize simulations wherein participants will be able to have a real-world virtual experience, applying the theoretical knowledge in the practical atmosphere. Proper collaboration between all the stakeholders does ensure that the digital resources do bear good results since the world is rapidly adopting digitization in various aspects.

Social Media Influence in Financial Behaviour and Government Involvement

Social media has a huge impact in spreading financial literacy in India. It was one of the biggest influencers of rise in investment during the pandemic. Many stock market training academies, YouTube channels and websites were founded during this period. The top 15 Indian YouTube channel focusing on equity markets have a subscriber base of more than 13 million. An increase in internet penetration and popularity of these mediums, triggered a rise in popularity of investment across India. Many people from different age groups began investing in equity markets and mutual funds. The retail investors’ share in cash market turnover increase from 39% in 2019 to 45% in 2020 [4]

But such social media implications are filled with a lot of vulnerabilities exposing users to fraud and fake information. In order to avoid misleading information be circulated RBI should keep a watch on the content that is being created and also run advertisements about various financial content.

Commercial and Private banks through several digital and print media can also act as financial educators and thus become trustworthy sources of financial information providers.

Removing Cultural Barriers

As we see from the previous slide that influencers, content creators have played a major role in inculcating financial education. People tend to learn more in medium they can relate and feel comfortable with.

Regional Banks can play a major role in this by creating awareness and spreading information in the local language, employing people for the same from respective communities. Regional Banks in various states have existed for a long time and people do associate with such banks easily especially the low income and rural households.

Adverts and campaigns can be run through popular regional figures and personalities, such as actors and singers. Local news and media channels can also act as regional content creators for the respective communities just like big national media houses.

Changing People’s Mindset on Holding Cash

The share of current account and savings account (CASA) deposits in total deposits increased to 44.8 per cent in March 2021 from 41.7 per cent 3 years ago [5]. The total number of bank accounts created have also increased in the same period. The number DEMAT accounts have more than doubled to 8.9 crore as of FY 2022 from 3.6 crore in March 2019 [6]. Yet this has not changed the mindset of holding cash.

The introduction of zero deposit accounts can play a major role in changing this mindset in low tier regions, encouraging deposits, along with attractive interest on those deposits.

Encouraging more UPI and digital transactions and accelerating the integration of digital payments interfaces into more sections of society. Financial Regulatory bodies like SEBI, IRDAI can run programs, educating people about various other financial instruments, encouraging more investments than holding cash.

Enhancing Insurance Penetration

The total insurance penetration in India was at 3.76% in 2019 (life insurance 2.82% and non-life 0.94%) and the total insurance density in India was at $78 in 2019-20 (life insurance density: $58, non-life insurance: $19.[7] [8] Considering a population of more than 1.3 billion the penetration is extremely low.

Like the other regulators, IRDAI can also work on content development by creating brochures, handbooks etc. It has also created mandatory board approved policy for insurers and arranges various seminars and quiz programs that can help in the encouragement.

Insurance Companies the prime being LIC, through innovative adverts, talk about the benefits of investing in insurance especially in sectors that are critical like life and health insurance.

Ease and Digitization of Insurance Process

Life insurers recorded new business premium of INR 2.78 trillion ($38 billion) in FY21 growing at 7.49% over the last year with private life insurers growing at 16.29%. Private Life Insurers account for 33.8% of the industry’s new business premium (FY21) with the rest being accounted for by the Life Insurance Corporation of India (LIC).

During FY20, life insurers issued 288.47 lakh new individual policies, out of which LIC issued 75.9% of policies and the private life insurers issued 24.1% of policies. In FY21, non-life insurers (comprising general insurers, standalone health insurers and specialized insurers) recorded a 5.19% growth in gross direct premiums. The market share of private sector companies in the general and health insurance market has increased from 47.97% in FY19 to 48.03% in FY20.[9]

Although the insurance market is growing, the penetration is quite less, owing to the complexity in the process. In order to ease and also digitize the whole process, UPI would play a crucial role. UPI is growing rapidly owing to its ease in operation. Insurance companies can collaborate with UPI companies to ease the insurance process and at the same time digitize the whole process as well.

Financially Empowering Women

Nearly 81% women in urban India and 77.4% in the country’s rural area own a bank account that they operate themselves, as per the National Family Health Survey-5 (2019-21). Overall, there has been a big jump in numbers, with 78.6% women across India owning bank accounts as compared to 53% in 2015-16.[10] Although there still persists a divide owing to social structure of Indian society and lack of awareness.

Both Government and Private Banks can introduce and implement women exclusive special bank accounts, bringing in more women consumers and bank account holders, along with regional banks for women in low tier regions.

Government along with the RBI can run several social inclusion programs and family campaigns encouraging more women participation in India’s financial sector. From the lower level, schools and institutions can also inculcate financial acumen amongst the girl students to encourage their participation in future.


The views expressed in this article are the author's own.

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