India Schedules First National Student Financial Literacy Exam

The financial literacy industry is buzzing over news that India has set the date for its first-ever nationwide exam designed to test the level of financial understanding of students. The test, dubbed the National Financial Literacy Assessment Test (NFLAT) scheduled to be administered on January 12, 2014, will contain 75 questions on a broad range of basic financial concepts.  It will be conducted in both Hindi and English in an effort to appeal to the broadest range of students.  The National Centre for Financial Education (NCFE) developed the exam and has enabled registration among schools via an online process. To encourage more schools and students to participate, NCFE is administering the test without any fee and is providing certificates to all participants, along with prizes to be won by students and schools that partake in this initiative.

The announcement of India’s first nationwide financial literacy exam comes at an important time for the global financial education industry, as both developed and developing countries are putting financial literacy high on their national policy, legislative and social service agendas.  The global financial crisis has put all countries on high alert of the fast-climbing rates of financial illiteracy within both economically rich and fiscally poor nations.  Along with this greater focus on financial education, policy leaders in many countries are seeking to develop and launch improved assessment initiatives to better understand the true state of financial illiteracy so that they can design more impactful solutions for their respective populations.

NCFE was created in India by the National Institute of Securities Markets with the support of India’s financial sector regulators, including the Reserve Bank of India, the Forward Markets Commission, the Securities and Exchange Board of India, the Pension Fund Regulatory and Development Authority, and the Insurance Regulatory and Development Authority.  These regulatory bodies share the important mission of enhancing the market quality by means of educational initiatives administered throughout India.

One of the more interesting elements of India’s planned national exam is that it is as much focused on educating young people as it is on assessment.  The program is designed not only to evaluate students’ current understanding of basic financial concepts, but also to teach them these subjects as students prepare for the exam.  In other words, it is the process of studying for the exam that many contend is the most beneficial aspect for the students.  As part of their preparation for the evaluation, applicants can make use of study materials that are provided without charge on the program’s website.  It is important to note, however, that questions on the exam might also cover topics beyond what is contained in the study materials.  As such, students will learn about financial concepts while they prepare, yet the exam will still serve as an effective assessment since it is designed to test topics that go beyond the scope of the materials.

It is widely anticipated that other countries will be following suit with stepped-up national efforts to gauge the state of financial literacy within their borders as well.  Financial education professionals, as well as local and national political and governmental leaders, are watching India’s NFLAT closely to appraise its success as both an educational initiative and a comprehensive assessment of students’ financial literacy.  Equally important, the mere existence and implementation of the NFLAT goes a long way in demonstrating the high stature of financial literacy on India’s national agenda, with other countries following in India's footsteps in the coming months and years.