India Pushes for Higher Levels of Financial Literacy

A senior official of the Reserve Bank of India reported that many of the businesses in India are challenged by gaps in financial literacy.   Speaking at a conference in Pune earlier this week, Deepali Pant Joshi, RBI Executive Director, declared that companies need to ensure that their customers understand the appropriateness and effective uses of their products, particularly in the area of financial services.  Joshi said that this is most evident in the imbalanced relationship between financial institutions and impoverished consumers.

The imbalanced relationship to which Joshi referred is growing widely in many regions throughout the world.  It occurs when less knowledgeable consumers are forced to select among products that are increasingly more sophisticated.  In such a scenario, there is a greater likelihood and ease for financial institutions to abuse their less educated consumers, while the consumers’ lack of financial literacy becomes more exaggerated by the nature of the more complex financial products.

As a result of this phenomenon that many refer to as the “imbalanced relationship,” many institutions and constituencies in India are moving ahead with cutting-edge financial education programs aimed at closing the financial literacy gap.  Moreover, this trend also is being observed in other countries that similarly exhibit an increasingly sophisticated range of financial products amid a large population of poor, financially illiterate individuals and families.  India’s investment in financial literacy is proving successful in helping to address the country’s issues in this area – and industry observers contend that India may become a model country for others to emulate to the extent its financial literacy programming and implementation continues on its successful trajectory.