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What is the financial literacy process? Describe it.

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Financial Literacy: Financial Literacy is the process of equipping oneself with knowledge and information on financial matters. Taking interest in financial literacy helps one to have better financial planning, puts them in a better position to achieve their financial goals, and protect themselves from frauds and debt traps. It aims to inculcate savings habits, improve the understanding of financial products leading to effective use of financial services, and thus helps better money management. Further, financial literacy facilitates easy access to financial services. Financial literacy material is available on the website of the Reserve Bank of India (www.rbi.org.in).

The financial literacy material available now covers subjects such as features of genuine banknotes, know your Reserve Bank, how RBI touches the life of the common person, caution against emails/ SMS offering huge sums of money from abroad, caution against providing bank account details on the internet, information of loan products available from banks, why save with banks ?, grievance redressal mechanism, Banking Ombudsman Scheme, caution against depositing money in unincorporated bodies/ unlicensed entities, Deposit Insurance (Are my deposits safe in banks ?, What is Deposit Insurance and Credit Guarantee Corporation), etc.

Financial literacy information is available in brochures/pamphlets prepared by RBI and other banks. Further, RBI has developed comics on financial literacy subjects for the benefit of the school children. ‘Raju and the Money Tree’, ‘Money Kumar and Monitory Policy’ etc., are the names of the comics that can be downloaded from the RBI website mentioned above. In addition to the above, for the benefit of word illiterate persons in rural, urban and remote areas, the State Level Bankers Committee (SLBC), Andhra Pradesh has prepared an audio CD on the benefits of saving with banks.

Financial Literacy is an important adjunct for promoting financial inclusion, consumer protection, and ultimately financial stability. Financial inclusion and financial literacy need to go hand in hand to enable the common man to understand the need and benefits of the products and services offered by formal financial institutions. In India, the need for financial literacy is even greater considering the low levels of literacy and the large section of the population that are still out of the formal financial setup. Financial literacy has assumed greater importance in recent years as financial markets have become increasingly complex and the common man finds it very difficult to make informed decisions. Further, in view of a higher percentage of household savings in our country, financial literacy can play a significant role in the efficient allocation of household savings and the ability of individuals to meet their financial goals.

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