The Reserve Bank of India (RBI) has published the National Strategy for Financial Education (NSFE): 2020-2025 document, marking its second installment following the original report released in 2013. Its function is to set out a roadmap towards creating a financially knowledgeable and empowered India.
The Preparation of NSFE: 2020-2025
For the duration between 2020 and 2025, the NSFE was meticulously formulated by the National Centre for Financial Education (NCFE) in collaboration with all Financial Sector Regulators; this includes RBI, the Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), the Pension Fund Regulatory and Development Authority (PFRDA), among others. These entities operate under the guidance of the Technical Group on Financial Inclusion and Financial Literacy (TGFIFL).
About NCFE
NCFE is a Section 8 (Not for Profit) Company endorsed by RBI, SEBI, IRDAI and PFRDA under the Companies Act, 2013. It focuses on a multi-stakeholder-led paradigm that seeks to empower various sections of the population with necessary money management skills to ensure their financial well-being.
The ‘5 C’ Approach
The NSFE recommends a ’5 C’ strategy for distributing financial education across the country. This includes:
1. Content: Creating relevant financial literacy content for different segments of the population.
2. Capacity: Developing capacity and code of conduct for financial education providers.
3. Community: Encouraging community-led strategies for sustainable dissemination of financial literacy.
4. Communication : Leveraging technology, media and innovative communication methods.
5. Collaboration: Coordinating efforts of stakeholders for better financial literacy.
Strategic Objectives of NSFE
The main tactical objectives of NSFE are:
1. To instill financial literacy as an essential life skill.
2. To promote active savings behavior.
3. To encourage participation in financial markets to reach financial objectives.
4. To cultivate credit discipline and urge formal financial institutional credit as per individual requirements.
5. To increase the safe usage of digital financial services.
6. To manage risks at different life stages by adopting suitable insurance covers.
7. To ensure preparation for old age through relevant pension products.
8. To improve knowledge about rights, duties and grievance redressal mechanisms.
9. To enhance research and evaluation methods to assess progress in financial education.
Adopting a Robust Monitoring and Evaluation Framework
Along with suggesting the adoption of a robust ‘Monitoring and Evaluation Framework’, NSFE also assigns the responsibility for periodic monitoring and implementation to TGFIFL under the oversight of the Financial Stability and Development Council (FSDC).
India’s Progress in Financial Inclusion
Over the years, India has made significant strides in integrating its citizens into the formal financial system with numerous notable government initiatives like Pradhan Mantri Jan-Dhan Yojana, Atal Pension Yojana, Pradhan Mantri Kisan Maan Dhan Yojana, and others. According to World Bank’s Findex 2017 Report, the proportion of adults with a formal account rose from 35% in 2011 to 80% by 2017.
Improving Financial Literacy Rate is Crucial
Despite this progress, India still has a long road ahead in achieving a commendable financial literacy rate crucial for inclusive economic growth. This will require the effective deployment of new channels for disseminating financial education messages, including social media platforms.
