Relevance of financial literacy for financial Inclusion

DEEPAK SHARMA

DEFINITIONS FINANCIAL INCLUSION:“The process of ensuring access to financial services and

timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost”- The Committee on Financial Inclusion (Chairman: Dr. C. Rangarajan, 2008)

DEPRESSED CLASS OF India- Out of formal banking system- no benefit of modern banking facilities and schemes for the development and vulnerability of poverty and exploitation by moneylenders-

So…. Bringing this population to formal banking system is the financial inclusion

Who are the excluded people& need to be includedRural areas 147 million household, 89 million farmers, 51%

no access to formal or informal credit and 73% HH no formal credit;

Loan access only 14% adult population 10% rural adult population

7%- 10% North eastern, eastern and central Indian states

Small and marginal Farmers, landless agriculture workers, unemployed persons, workers of unorganized sector like construction, vendors, Scheduled Caste and Scheduled tribes, women, and slum dwellers, migrants, people of remote areas and geographically hard regions etc.

Why this exclusion….Lack of poor oriented financial products Irregular income or no income and

uncertainty of agriculture in IndiaAccessibility of bank servicesComplexity of terms and conditions of the

financial institutionIlliteracy of the people in general: the biggest

devilDocumentation problem

What is the solution.. Co-operative Movement, Nationalization of banks RRBs Service Area Approach Self Help Groups Mandatory bank account in MNREGA etc. But failed…..reason No Financial illiteracy….

How financial literacy can help Provides familiarity with and understanding of the financial market

products, rewards and riskRendering capacity to financial management of the family first of

all..regular saving and investment, appropriate expenditure, insurance claims

Improve money management skill & managing debt halt on unnecessary expenditure borrow at only unavoidable conditionsProper investment in productive usagesHandling bank and structured financial systemHandling financial market…how to use limited money Avoid wrong choices/ haste/ repenting at leisureBank account, ATM, immediate credit, saving products, remittances

and payments, insurance, mortgage , entrepreneurial credit etc.

Thank you