Explain Financial Literacy

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The present scenario where a large emphasis is being given on the digitalisation of the various financial transactions taking place in the economy of the India, the parameter of the financial literacy becomes a lot more critical and important in the nature and the working. The most important point that needs to be under stood here is that in this case of the financial literacy, the major problem that comes in to the lime light is that the term financial literacy sounds like an alien to the most of the individuals. But as the time is changing so is the banking and the way to bank is changing in our nation of the India, the concept of the financial literacy is now becoming one of the most top priorities for the India as well as the large no of the nations of the whole world. But it can be said that the concept of the financial literacy is much more critical and also very vital for the large no of the developing nations like that of the India, where the majority find the financial literacy beyond the comprehension.

The financial literacy can be defined as the ability that allows using the skills and the knowledge to take its effective and the informed money management decisions. The financial literacy is the need of the hour and it is very urgent that the nation of the India starts adapting in to the system so that the proper growth in a phased manner can take place. As per a global survey conducted by the Standard & Poor’s Financial Services L L C (S & P), only the 25 percent of the adults or less are financially literate in the south Asian countries. For an average Indian, the financial literacy is yet to become a priority. India is said to be the home to the 17.5 percent of the world’s population and nearly 76 percent of its adult population does not under stand even the basic financial concepts. The survey confirms that the financial literacy in the India has consistently been poor as compared to the rest of the world. It can be detrimental to the India’s ambition of becoming an economic super power in the coming years. The financial literacy puts a great amount of the burden on the nation of the India in the form of the higher cost of the financial security and the lesser prosperity. The most of the people resort to the investing more in the physical assets and the various short term instruments which clearly conflicts with the greater need for the long term investments, both for the house holds in order to meet their life stage goals and for meeting the country’s capital requirements required for the infra structure. In addition, there are certain erroneous beliefs associated with the financial literacy, the most common being the myth that the one who is literate or rich is financially literate too. The need of the hour is for a drastic over haul of the approach to the savings and the investment by the Indian house holds.

But to be honest and if the various facts that have come out by the various types of the surveys that have been done in the nation of the India and also internationally, the nation of the India is very way behind the various developed nations in the types and the amounts of the efforts that are being made in the direction of the financial literacy. In the nation of the United States of the America, the financial literacy promotion was started way back in the year of the 1908 by the very popular the American Credit Union Movement. In the year of the 1957, the financial education was made compulsory by the state of the Nevada and the other states followed this historic step. The nation of the Australia provides the financial literacy education through the customised programmes while the Asian countries such as the nations of the Indonesia and the Singapore have the successful precedents in the financial literacy drives. It is very necessary that all this is taken care when very young as it is a myth that the financial literacy is more important for the adults. We can achieve the desired results from the financial literacy only when we start providing the education to our children. But all this can not be achieved singly and the need of the hour is the need for the joint efforts of the various types of the institutions like the various financial regulators of the India, the reserve bank of the India, the S E B I, the I R D A I, the P F R D A. All these institutions have created a joint charter called the national strategy for the financial education detailing the various types of the initiatives taken individually by them and the other market players like the banks, the stock exchanges, the broking houses, the mutual funds, the insurer’s etc. The main requirement is of a joint effort by all the banking, the financial services and the insurance players for the noticeable changes in the perceptions that an average Indian has about the financial management. The empirical evidence points to be the fact that the digital efforts like the video clips, the various types of the short films and the various interactive quizzes on the financial education have had a far greater impact than the traditional medium. The digital fluency is very much expected to increase with the government of India’s initiative such as the digital India. The very recent mammoth exercise of the de monetisation should help bring many more of the people to the organised sector and there by opening up the various types of the possibilities for the financial inclusion and for the literacy as well. According to the current situation, only about 35 percent of the Indians have the bank accounts but this situation is very much better in the various other countries of the world like in the nation of the republic of the china, this no is all lost about at the level of the 63 percent. The launch of the various types of the digital wallets, the various types of the universal payments inters face and the new age commercial and the various types of the payment banks have paved the various new ways for a less cash economy. There is a huge scope with the only 2 percent of the Indians who are using the mobiles for the payments against the 11 percent in the Nigeria. The push to the increase usage of the mobiles for the various types of the payments and this is very significant picture that has come in to the lime light in the recent times.


The whole world and in particular the nation of the India has come a long way forward in the area of the financial literacy and the financial stability is also a very key factor that plays a very critical role in the achievement of an efficient economy. There is a need to reach out to the lower income groups and the economically weaker sections on the one hand and on the other hand to the millennial who are very hyper connected and hence also require the tailor made financial products but have very limited aware ness of the possible financial solutions. All the stake holders including the consumers must work in the conjunction for the financial literacy through a combination of the various types of the strategies that are innovative in the nature.

But in all this, it is also very important that we, as the whole the nation of the India, should stay safe from the various types of the digital threats and the scenario that has been created of the digitalisation in the nation of the India, it is very important that we do not flow away in this motion. The world especially in the financial services has been talking of the fraud for quite a while now. The banks and the other various types of the entities communicate with the customers in order to educate and warn them of the threats with the aim to mitigate the fraud. The entire world was once again awakened to the reality of the threats to its digital world when the ransom ware attack by the name of the Wanna cry (aka WannaDecryptor and WannaCryptor 2.0) hit around the 150 countries with one of the most malicious cyber attacks in the recent times. Taking the advantage of the vulnerability in the micro soft windows, it affected more than 200000 machines, demanding 300 bit coins from each of the user to give the bank access of his or her machine and the data. With this type of the attack, the fraudsters are on the look out as a few of the facts about the digital attacks and the fraud are clear to the world. The most importantly, the fraudsters are always on the look out for a loop hole or a flaw that the others did not at all notice, in order to take the advantage of the system. The attacks of this kind or the magnitude are rarely by an individual but by an organised group, very often global syndicates. These attackers meticulously plan the entire modus operandi to ensure they are not traced easily. It takes considerable investments to stay ahead of the various types of the fraudsters and the cyber criminals at every step. These types of the attacks can be of the different types that can be launched mainly targeting the personal and the financial information which was assumed to be very safe and also invulnerable. Fraud is getting more and more sophisticated every day. Fraudsters don’t just hide behind the multiple proxies any more. In a recent case in the Mumbai, a business man lost Rs 1.8 crore to a Nigerian gang of the fraudsters, masquerading as the seed traders.


This time, the swindlers went one step ahead and a representative even met the victim in the real. The impostors are now willing to take the risk of the physically exposing themselves when they know that the victim is likely to fall prey to such of the tactics. Hence, there is an ever increasing need for the people to be aware of the fraud and the know how as to how to tackle such situations of the threats of the frauds. It is very important for the various types of the institutions to under stand the concept and the need of the requirement for the management of the risk. Any type of the institution or the business that is privy to the confidential data must have the sophisticated fraud and the risk management processes and the various types of the tools and hence keep the abreast of the latest fraud trends. For the lay man, there are a no of the small type of the precautions one can take in order to safe guard the various types of the information that is available. A certain amount of the cyber hygiene should always be practised with the help of the every one that is available as this will help a lot in the reduction of the chance of the occurrence of the fraud. Never ever dismiss or even under estimate the importance of keeping your all of the devices and the all type of the information safe. Having a legitimate and an up dated anti virus is a must and an important tool, especially for the devices like the lap tops and the various available mobile phones as they help to connect to the inter net and hence making them vulnerable to the various types of the attacks. Do not divulge the pass words, the pin numbers and the other sensitive type of the information that is present in the records. Vishing has become a very common method to scam the un suspecting customers who always believe that the representative of the bank is asking for their personal details and the pass words, some times even the O T P that is used in order to authenticate the transactions and also remember that the bank or any other institution will never ever ask any type of the confidential information from you. Another type of the mistake that the people very often make is of the writing down of the pin or the password on the back of the card. If in any of the case, the card is lost, one can block it immediately before the fraudster tries to use it, but armed with the pin, he can defraud you with in the seconds. Some people also jot down the pin on a bill and let the merchant enter the pin and then authenticate the transaction. In any of the case the card has been skimmed, the person can any time simply use the details and the pin in order to use the card holder’s account.

Ensure that you comply with the latest improvement or the changes like the up dating of your contact details and then also completing the K Y C wit the issuer. For example, the traditional magnetic stripe cards are being phased out and also then replaced with the chip and the pin cards across the board. These cards are much more secure and are also encrypted in the nature, hence making them much secure as compared to the normal cards. With the help of this, the chance of the fraud vis-à-vis the magnetic stripe cards, is reduced by a great level and the amount too. If you have not yet changed your debit card or the credit card, ensure you request for one from your issuer of the card. Make use of the new type of the technology that is available like that of the apps that safe guard your information and also the pass words. Now a day, there are large no of the apps that are often linked with the m banking, that lets you choose where your card can be used and also to what limit and on what channels, giving you a greater degree of the control over your credit cards and the debit cards. The digital transactions are very safe and also very convenient, letting the people the people pay with out the use of the cash. How ever some degree of the care and the precaution is very necessary to keep the one self safe from the new types of the threats that are emerging on a day to day basis. As a result we and as a whole our nation is growing but at an unequal pace and an unequal level as this is shown clearly by the fact that the UN sustainable development goal on the imparity is a long distance away from the achievement. The nation of the India has about 101 dollar billionaires and the 236000 dollar millionaires but the fact remains this that in comparative to these all of the factors, there are a few million of the people that are not even having the basic amenities of leading a life like that the toilets and the piped water. The Indian economy is a huge one as it is having the G D P that is amounting to $ 9.4 trillion (P P P) but there are pockets of the extreme deprivation and the visible income inequality. The wealthy in the nation of the India have always increased the their influence in the politics and the economics of the country while the declining influence of the low income marginalized groups has always stifled their voices and has also under mined the level of the democracy. The rising inequality always in any of the case threatens the long term social and the economic development of the countries even when they are in a phase of the experiencing the high growth of the G D P. It always destroys the self worth of the people and the confidence, the breeds’ crime and all this leads to the ill health among the poor due to the inadequate public health care facilities and can always fan the various types of the terrorist activities and hence causing the degradation of the environment. But there is nothing inevitable about the growing income inequality and the several countries have managed to reduce the inequality of the income while achieving the high rates of the economic growth.


Reducing the inequality is the goal 10 of the UN’s sustainable development goals. Is it possible for the countries like that of the nation of the India to meet it? A recent report by the Oxfam and the development and the finance Inc. in the month of the July 2017 has ranked the governments according to the commitment in order to reduce the level of the inequalities in the entire world. An index has been computed by them regarding the commitment of the countries and the India’s rank is very low at the 132nd position among the 152 countries. Even though the N D A government is pursuing the policies of the financial inclusion in order to reduce the level of the inequalities, there seem to be few no of the debates on the subject of the interest in the domain of the public. Clearly we only want to project the nation of the India as the fastest growing and the emerging economy which is a great type of the destination for the investment in the scenario of the today. Also it is very true that the extreme type of the poverty has come down in the nation of the India but there are still 250 million people who are earning less than the $ 2 per day and this part of the economy is a very major type of the concern and this results in very poor living conditions for an individual and as a result of this it impacts a lot in the over all structure of the nation of the India. The extreme type of the in equality has been shown to inhibit the social mobility which means that the children of the poor parents will stay poor because of the unequal type of the opportunities. Unless they come from the back grounds that are privileged in the nature, the young people of the India will have very few opportunities in order to make the most of their skills and the talents though there have been a few of the exceptions in this regard. In the Oxfam and the D F I report, the different forms of the government’s always a very active role in the reducing of the poverty and also the in equality that in the recent times has been found to be accessed. The 13 developing countries that have reduced their over all in equality have done so because of the reason of an increase in the public services, the progressive taxation and the rights of the labour. These three pillars have been found to be critical for the reduction in the level of the in equality. The nation of the India has always fared poorly on the rights of the labour as well as the respect for the women in the work place.

The governments spending on the area of the health, the education and the social protection is woefully low as compared to the other countries of the B R I C S and the structure of the tax all though very progressive in the nature, is in the practice full of the loop holes and the exemptions and also has led to the wide spread evasion in the recent past. On the rights of the labour, it has been observed that the nation of the India per forms very poorly as the majority of the labour force works in an agricultural and the in formal sectors which lack the union organisation. The unions of the labour are very use full for the collective bargaining for the wages but since the era of the economic liberalisation began, the unions of the trade have become weaker even in the organised sector. The strong rights of the labour in a country that helps the youth in the labour force secure the fair wages and also this helps in the reduction of the inequality. In the south Asia, surprisingly the nation of the Nepal ranks the first according to the index for the commitment on order to reduce the inequality, the nation of the Maldives is at the second place and then comes the turn of the nation of the India. The nation of the Sri Lanka is at the fourth place followed by the nation of the Pakistan and then the nation of the Bangladesh and then comes the turn of the nation of the Bhutan, followed by the nation of the Afghanistan at the 8th place. The nation of the Nigeria is the worst of the performers among the various other countries of the world and with no surprises; the nation of the Sweden is at the no 1 spot with the best performance as compared to the various other countries of the world. The measure of the level of the in equality when taken in to the consideration is the Palma ratio that compares the incomes of the top 10 per cent to the bottom 40 percent. This is also considered as the best measure of the in equality as it takes the all of the factors in to the account of the incomes of the extremes of the income distribution where as the gini coefficient focuses more on the incomes of the those who are in the middle and as a result of this can under estimate the importance of the top incomes. In the nation of the Sweden, the Palma ratio is less then the level of the 1, as the top 10 per cent is earning the same as the bottom 40 per cent. According to the report, all the countries should aim at a Palma ratio of no more than the one. The Palma ratio of the nation of the India is at the level of the 1.5. Although the three criteria that are used widely in the calculation of the index are very important, the other types of the various policies of the government are also very important and also very vital and critical for helping in the reduction of the in equality. For the example, the policies towards the small and the medium enterprises, the rural development, the gender relations and the various types of the agricultural spending by the governments of the state in order to raise the level of the productivity and this parameter is very much important in this regard of the literacy.

The huge numbers of the India’s small and the marginal type of the farmers and the land less labour need the important required help in the various ways for the raising of their respective incomes. The government spending on the rural infra structure is very important in the villages and this has not been taken in to the account in this type of the index. The lack of the connectivity and the good type of the roads often lead to the isolation of the of the villages from the towns and the cities and this factor can play a very bad role in leading to the increase in the poverty level of the society as it limits the earning capacity of the people. Similarly, the corruption leads to the great type of the rise in the levels of the in equality. The interest of the N D a government, in the eradication of the corruption is very fine but it will take a long time in order to achieve this status and the demonetisation factor that has worked as an experiment has also helped a lot in this type of the situation. The spending of the government on the parameter of the education is about the level of the 3.1 per cent pf the total level of the G D P but the quality of the primary education remains a big level of the problem and this needs a very large amount of the improvement on a very urgent basis. The expenditure of the government on the sector of the health is on a very huge level but most of it that is being done is very in adequate in the nature of the use at the 1.3 per cent of the G D P and as a result of this, there are not enough of the public hospitals that are easily accessible to the poor and who have to go for the private health care, the affordability factor comes in to the lime light as such type of the hospitals are very often not at all reliable due to the many of the add on charges. The out of the pocket expenditure for the citizens of the India has been found to be one of the most highest in the calculation and as a result of this, there is observed an increase in the level of the in equality as the middle income people often loose there assets in all this and the various types of the savings are also lost with some one in the family under going a private medical treatment. More of the jobs will certainly reduce the in equality of the income as it will increase the incomes of the members of the family. This is taking place at a tardy pace and remains a sore point. More the manufacturing of the jobs, more it will give the employment to the unskilled seekers of the job but unfortunately the industrial growth has shrunk a lot by the 0.1 per cent in the recent times. A social safety net for the various in formal sector workers like the life insurance and the pension policies is very important and hence has been initiated by the Modi government. But a lot more needs to be done towards meeting the goal no 10 by the year 2030.

This article has been written by KJ Singh a MBA Graduate from a prestigious Business School In India
Article Published:October 8, 2017
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