Financial literacy is the ability to use skills and knowledge to understand how money works and take effective money management decisions. For a developing country like India, financial literacy plays a big role, as it is an important factor for the promotion of financial inclusion.
According to a global survey conducted by Standard & Poor’s Financial Services LLC (S&P), less than 25% of adults are financially literate in South Asian countries. For an average Indian, financial literacy is yet to become a priority. India is home to 17.5% of the World’s population, but nearly 76% of its adult population does not even understand basic financial concepts.
As per the survey, financial literacy in India is very low, when compared to other countries. Financial illiteracy has lead to higher cost of financial security and lesser prosperity. For instance, many Indians invest only in physical assets and short-term instruments. This conflicts with the greater need for long-term investments, both for households to meet their long-term goals and for meeting the country’s capital requirements for infrastructure.
India is lagging developed countries, in financial literacy efforts. Financial literacy promotion in the USA started way back in the year 1908 and Australia provides financial literacy education, through customized programmes.
In India, financial regulators like RBI, SEBI, IRDAI and PFRDA, have created a joint charter called "National Strategy for Financial Education", to tell you about the initiatives taken individually by them and other market players like banks, insurers, stock exchanges, mutual funds and broking houses.
Now, all Banking, Financial Services and Insurance players have to join together and promote financial inclusion across the country.