In a far flung village of Andhra Pradesh in India, Achhamma was forced to hide her hard-earned money under the kitchen stove so that her drunkard husband could not get his hands on it. When first introduced to ICT-based banking, with some trepidation she asked, ‘Can anyone take away my money from my bank account without my knowing it?’ When it was carefully explained to her that due to the use of biometric devices for unique identification, no one other than her could touch the money in the bank, she was comforted enough to deposit all her savings in the bank. And today Achhamma runs a small business making pickle and is aspiring to expand the enterprise.

This is the power of Financial Literacy. Now I move to formal presentation.

What is Financial Inclusion (FI) and Financial Literacy (FL) & how they are intertwined ?

Is Financial Literacy only a demand side function of FI or is it an integral part of financial access?

Status of FI & FL in India. What is happening on National Strategy for Financial Literacy?

Financial Literacy Initiatives – In text and in pictures.

Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by regulated mainstream institutional players. Financial Literacy aims to build people’s capability

to use these financial products & services to improve their financial well being. Financial capability can only be developed if

appropriate access to financial products & services is provided.

Like knowledge of traffic rules & car technology does not create demand for cars but helps safer use of it, FL helps you understand risk-return framework associated with financial products & services better. For the large unbanked population in India, basic

banking products like savings accounts, deposits, small credits & remittances are relatively risk free. Thus, for us in India Financial Literacy is a tool for

promoting financial inclusion by weaning away poor from the clutches of moneylenders and bringing them in the fold of mainstream financial institutions.

National Focus on Inclusive Growth

Financial Stability & Development Council (FSDC) headed by the Finance Minister mandated to focus on Financial Inclusion and Financial Literacy

Financial sector regulators including the Reserve Bank committed to FI mission

Financial Inclusion is a mammoth task- financial services through regulated mainstream financial institutions to 600,000 villages

Main plank for our FI Model : Bank- led

ICT-based doorstep delivery of banking services through Business Correspondents (BCs)

Technology Neutral/ Delivery Model Neutral

Availability of minimum four products and services, viz. a savings account with overdraft facility, a remittance product, a pure savings product preferably variable recurring deposit, and an entrepreneurial credit such as Kisan Credit Card (KCC) or General purpose Credit Card (GCC)

ICT based BC Model for door step low cost banking services in remote villages substantially liberalised

Board approved Financial Inclusion Plans of banks for 3 years, starting April 2010

Roadmap to cover villages of above 2000 population by march 2012

Mandatory opening of 25 % of new branches in unbanked rural centers

KYC documentation requirements significantly simplified for small accounts.

Pricing of advances for banks totally freed

SR Particulars March 10 March11

1 Total Villages Covered 54258 100183

2 Urban Locations covered through BCs 433 3757

3 No Frill A/Cs (No. in Million) 49.33 73.94

4 Amount in No Frill A/Cs (Amt in Rs. Billion) 42.57 57.03

5 Kisan Credit Cards(No. in Millions) 17.63 20.19

6 Kisan Credit Cards (Amt In Rs. Billion) 987.49 1323.52

7 General Credit Cards (No. in Millions) 0.47 1.08

8 General Credit Cards (Amt In Rs. Billion) 7.53 23.28

9 ICT Based A/Cs-through BCs (No. in Millions) 12.54 29.5

10 EBT A/Cs-through BCs (No. in Millions) 7.48 14.7

Expectations are huge

Delivery Model - right mix of low cost Brick and Mortar structures & BCs

Appropriate Business Model for FI activity for banks, Technology Providers and BCs

For profit corporate BCs- though permitted- yet to take off

Digital and Physical Connectivity

Universal KYC across regulators – banking on Aadhaar (A unique identity number being given to citizens) ?

SR Particulars Mar 12- Target Mar 13- Target

1 Total Villages Covered 219759 352787

2 Urban Locations covered through BCs 6070 8618

3 No Frill A/Cs (No. in Million) 112.51 158.36

4 Amount in No Frill A/Cs (Amt in Rs. Billion) 74.5 88.72

5 Kisan Credit Cards(No. in Millions) 27.66 35.04

6 Kisan Credit Cards (Amt In Rs. Billion) 1446.91 1727.77

7 General Credit Cards (No. in Millions) 3.74 6.13

8 General Credit Cards (Amt In Rs. Billion) 42.68 67.25

9 ICT Based A/Cs-through BCs (No. in Millions) 64.14 101.5

10 EBT A/Cs-through BCs (No. in Millions) 24.91 36.9

Multi-Agency Approach - A large number of players are involved.

Government-Central & States

Financial Sector Regulators including Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA) etc. Banks, Insurance Companies, Pension Funds, Financial Institutions like National Bank for Agriculture and Rural Development (NABARD) & Corporates

Industry Associations, Banks, other market players, NGOs & other members of Civil Society

Emphasis is to improve the Financial Access through better Financial Literacy

Multi-dimensional/disciplinary Approach Outreach visits to villages by top executives of RBI and

banks with a view to achieve 100% ICT based FI in these model villages

Over 250 Financial Literacy & Credit Counseling centres have been set up in the districts across the country by banks

Regular participation in local fairs & exhibitions to promote FL through distribution of comics, posters , banners and street plays on FL

Programmes in schools & colleges on FL through debates, quizzes, skits, essay competitions etc. by banks, corporates and RBI

National & State level rural livelihood missions have large number of field functionaries for proper handholding support to large number of Self Help Groups

Large number of websites/portals of banks/RBI & its offices/State Level Bankers Committees disseminating information on banking services

Conduct of FL programmes by Rural Self employment training institutes

Conduct of training programmes for farmers club, NGOs & SHG members by NABARD

Inclusion of Financial Education material in school curriculum by various State Governments

Use of mobile Financial Literacy vans by banks in the North Eastern States

Weekly Radio programmes on FL in Jammu & Kashmir State by a bank & similar programmes in Tribal districts by NABARD

Awareness programmes on various Government Sponsored self employment schemes involving bank loans & subsidy by Government agencies like KVIC,DICs, SC/ST corporations

Mass media campaigns, tie ups with educational institutes, financial awareness workshops/ help lines , books , pamphlets and publications on FL by NGOs, Financial market players etc.

Why open a Bank Account?

Why should one save ?

What are the benefits of being part of Payment & Settlement System?

Why should we borrow within capacity?

Why Credit should be linked with income generating activities.

Why to repay the loan? Repayment Ethics

Why plan your financials and how to keep financial records ?

Risk return trade off – Key Message

If return is high, the risk is much higher.

Do not take risk that you do not understand

As and when income levels go up, for more secured and hassle free life, investments in insurance, capital market and other products should be explored. Create a mix of instruments in portfolio.

Creating customer awareness on Right to Fair Treatment and Protection

As is evident a large number of individual efforts are going on. The need is to integrate them into a National Strategy for Financial Literacy.

Formal efforts are already on. As mentioned earlier FSDC has inter-alia been entrusted with responsibilities of Financial Inclusion & Financial Literacy.

A paper on the National Strategy was recently placed before the sub-committee of FSDC, headed by the Governor of RBI & Chairman SEBI, IRDA, PFRDA and Finance Secretary, Government of India as members, for its consideration

Outreach / Public Contact Programmes

Financial Literacy comics like ‘Raju and the Money Tree’, pamphlets, booklets , posters etc

Participation in fairs, exhibition etc.

Addressing the need for Financial Literacy in school curriculum

Making of audio visual material on financial topic

A. Financial Literacy and Credit Counseling Centres (FLCCs)

Spread of Financial Literacy to create awareness of the advantages of access to financial products & services with the aim of attaining Financial Inclusion and provision of counseling facilities for customers of banks in the vicinity.

Financial literacy programmes conducted through dissemination of information through pamphlets/ brochures of various credit, deposit, remittance, insurance products etc that can be availed. Spread of Financial Awareness through participation in local fairs and organizing camps to spread information on availability of financial products .

B. Rural Self-Employment Training Institutes (RSETIs)

The objective of the RSETIs is to provide cluster based training to the prospective beneficiaries. They also help in providing Financial assistance to such trained entrepreneurs.

C. Banks are imparting financial knowledge as part of marketing of their products

Organizing street plays for educating the general public on benefits of carrying out financial/ monetary transactions through banks,etc.

Broadcast of FL related drama/ information through FM radio

Conducting FL programmes for farmers club and SHGs and encouraging them to become banking facilitators.

Training programme for master trainers with a view to utilize their services for propagating the message of FL.

Financial assistance provided to Banks to open FLCC to popularize the FL drive.

Conducting training programmes for branch managers of the banks to undertake FL.