The Reserve Bank of India is certainly not short on ambition with its draft strategy for financial education for consumers. The discussion paper, now thrown open for public comments, recognises the important role financial literacy and financial education play in promoting financial inclusion and inclusive growth. As a first crucial step towards reaching those important national goals, the draft paper discusses ways of creating awareness and educating consumers on access to financial services, availability of various types of products and their features. The strategy makes a strong pitch for conditioning the changing attitudes of consumers so that the knowledge gained through financial education is translated into responsible consumer behaviour. Finally, consumers of financial products need to be made aware of their rights and obligations. The RBI’s approach to financial education is in line with those of many other countries which, especially since the beginning of this century, have realised the full potential of spreading financial literacy through national projects. Given the large number of stakeholders, including the Central and State governments, banks and financial institutions, a coordinated national project rather than piecemeal approaches at different levels will be more beneficial.

Financial inclusion, by itself, is one of the top policy priorities of the government. It is also an essential part of the larger social inclusion agenda. Financial education will help in promoting knowledge and skills which a relatively youthful population needs to avoid the pitfall of reckless spending through, say, the indiscriminate use of credit cards, a habit vigorously promoted by irresponsible marketing schemes. Financial education in that sense is akin to the investor education programmes conducted by the Securities and Exchange Board of India and affiliated investor associations. Such initiatives have not had the impact hoped for. One hopes that the national level financial education programme starting at the primary school level will make up for the shortfalls in the sector specific programmes. Financial education will have a positive, multiplier effect as ordinary citizens get to know the nuances of savings and investment. In turn, there will be a welcome deepening of the financial markets. While the RBI’s draft paper is comprehensive, what is missing is a recognition of the existing skills shortage in the financial sector and the steps to be taken to overcome this basic problem. For the financial sector, the biggest challenge is to train and retain manpower for not only its more traditional functions but also to further highly desirable social goals such as financial education.

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