Finance Minister Pranab Mukherjee on Monday called for a change in the mindset of bankers and other stakeholders for financial inclusion of the hitherto un-reached and under-reached segments of the population.

“We need new approaches to financial inclusion that build on the lessons of the past. This requires a change in the mindset of policymakers, practitioners and other stakeholders to reach out the hitherto un-reached and under-reached segments of our population,” Mr. Mukherjee said here at a workshop on financial literacy.

Noting that financial literacy and education play a crucial role in financial inclusion, inclusive growth and sustainable prosperity, he said the goal of universal inclusion had eluded, though the financial sector policies were driven by the objective of increasing financial penetration and outreach.

“The strategy for expanding the outreach of the financial system had relied primarily on expanding branching, setting up newer institutions like the RRBs (regional rural banks) and targets for credit to broad categories of the financially excluded. Though it had an impact and altered many a life, the outcomes of these efforts have been mixed due to the sheer enormity of the challenge,” Mr. Mukherjee said.

Inaugurating the two-day workshop, hosted by the Reserve Bank of India (RBI) and the Organisation for Economic Cooperation and Development (OECD), Mr. Mukherjee said the financial literacy had also been linked to saving behaviour and portfolio choice, often connecting financial knowledge to one specific type of transaction.

For instance, the financially less literate are found to be less likely to plan for retirement, to accumulate wealth and to make wise investment decisions.

“The recent global financial crisis has raised the question of whether individuals’ lack of financial knowledge led them to take out adjustable rate mortgages (ARMs) or incur credit card debt they could not afford,” Mr. Mukherjee recalled.

Defining financial education and literacy as the capacity to have familiarity with, and understanding of, financial market products, especially rewards and risks to make informed choices, Mr. Mukherjee said financial literacy primarily related to personal financial education to enable individuals take effective actions to improve their well-being and avoid distress in financial matters.

In this context, the finance minister lauded the initiative taken by the central bank with the state government to impart financial education in Karnataka by including financial literacy in the school curriculum.

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