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Financial Literacy Awareness

Chapters
Synopsis
Introduction
Objectives
Scope
Research methodology
Need for Financial literacy
Importance of financial literacy
Determinants of Financial literacy in an individual
Scenario in India
Study on financial literacy by experts
Investment options
Financial education
Initiatives taken in India
Financial inclusion
How to develop financial literacy
Primary data
Findings
Recommendations
Conclusion
Bibliography
SYNOPSIS
The financial system plays an important role in the growth and
development of a nation. The financial system plays an important role in
the growth and development of a nation. The basic function involve is to
transfer fund from surplus generating unit to deficient generating unit.
Since economic reforms, India has one of the highest saving rates
in the world but allocation of these savings is a cause for concern.
Creating financial literacy plays an important role in information,
knowledge, skills to evaluate options and enables consumers to
understand the implications of alternative financial decisions. Though
financial literacy increased in India but negative symptoms which are
observed are underinsurance, debt
trap, insufficient retirement fund, low return on investment and the cause
of all these is one and the same is financial Literacy.
This research with the help of questionnaire outlines the necessity and
importance of financial literacy for the growth and inclusion.

Financial Literacy Awareness

Introduction
Financial literacy refers to the set of skills and knowledge that allows
an individual to make informed and effective decisions through their
understanding of finances. Improving financial education and literacy
standards underpins is a major component in all our work and projects.
Financial literacy means understanding financial products, concepts
and risks, and through information, instructions and/or objective
advise, develop the skills and confidence to become more aware of
financial risks and opportunities, to make informed choices, to know
where to go for help, and to take other effective actions to improve
their financial well being.
Thus financial literacy is the ability to know, monitor and effectively
use financial resources to enhance the well being and economic
security of oneself, ones family and business, and also for improving
the understanding of the financial service providers. In our case, our
focus of financial literacy will be SHG members and their families and
all other organizations who are involved with them.
The concept of Financial Literacy, is essentially spreading the
knowledge of good money management practices. It
encompasses all monetary transactions that a person enters into such
as earning, spending, saving, borrowing and investing. These
transactions cannot be avoided and they are all integral parts of a
persons life, and hence the introduction of financial literacy will help
people, especially women to manage these transactions to their
advantage. With financial literacy, poor will have opportunity to learn
skills related to:
a) setting economic goals,
b) making a financial plan,
c) managing cash flow,
d) keeping financial records,
e) minimizing debt,
f) planning for the future,
g) socially responsible actions without jeopardising the environment
or natural resources

Financial Literacy Awareness

OBJECTIVES
To understand the meaning of Financial Literacy
To identify factors that determine Financial Literacy
To understand knowledge of Financial Literacy among people
To understand ways to develop Financial Literacy in an Individual

SCOPE
The scope for studying financial literacy awareness is huge as the study
may differ as per the demographics of the sample size.
This project focuses on Financial literacy awareness among
undergraduate students in Mulund College of Commerce as they will be
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the future earning population.

Research Methodology
A suffice research was undertaken to meet the objectives of this study
with the collection of both secondary and primary data.
The primary data was collected through a questionnaire designed for a
sample of 100 students in Mulund College Of Commerce.
The secondary data has been collected from various references from
books,magazines,journals and the internet.

Limitations
Since the scope is vast, study was restricted to Awareness among
undergraduate students and thus observations will be limited.

Financial Literacy Awareness

Need for Financial Literacy

The definition of financial literacy is "having the knowledge, skills
and abilities to undertake responsible economic and financial
decisions and actions with a requisite level of competence." The recent
global economic downturn has served to highlight our deficiencies in
this area and has shifted focus to the need for financial education.
The need for financial literacy and its importance for financial
inclusion have been acknowledged by all possible stakeholders policymakers, bankers, practitioners, researchers and academics
across the globe. Various financial literacy programmes have thus been
implemented by concerned institutions, with a lot of them being
unique in their approach and delivery mechanisms. For instance,
programmes have been customized to suit the requirements of
students, microfinance clients, slum dwellers, bank clients etc. Some
programmes have a particular focus such as a specific financial
product, developing saving habit among target group, customer
protection, business management, and so on, while others are more
general and deal with money management skills, advocating healthy
financial practices etc. Varied techniques such as videos, stories,
activities, comic books etc. are used, along with traditional methods of
classroom training. Banks like Punjab National Bank and State Bank
of India have also begun setting up financial literacy and credit
counselling centers that people can go to for gathering requisite
information.
While a lot of experimentation has been done in the realm of financial
literacy, it is difficult to point to one standardised method or approach
that works best in all scenarios with all kinds of target populations.
Although this could be attributed to the lack of a standard definition or
measurement tool, it is also a result of Indias diversity in terms of
language, caste, culture etc. Hence, it is challenging to design a
product that fits all sections of the population equally well.
Going back to the drawing board, it is important to work with the
premise that financial services needs of an individual vary primarily
by age. While these also depend on financial status, social status and
other factors, let us keep that constant and consider the life cycle of a
poor household (primary target beneficiaries of financial literacy
programmes). Children initially stay with parents and go to school.

Financial Literacy Awareness

Following studies, they may move out of the parents house and begin
to live on their own (or with friends/ housemates) and earn their own
living. They then get married, form a couple and start their own
family. By this stage, the parents are old, with reduced income levels
because of lower physical capacity to work. They seek support from
their children who have just been endowed with new responsibilities
of a family, with children of their own to raise. The cycle continues
with these children getting educated, moving out to find a job and then
eventually raising their own families, while assisting their parents.
Figure 1. Life cycle of an individual/ household

This simple story of the household involves an exchange of

dependency and responsibilities at each stage. Considering just the
financial services needs of the household over its life cycle, we see
that they are very specific to the stage that the household or individual
is in at a given point of time. For instance, as a school going kid (in
his/ her teenage), an individual might require know-how of savings so
that he/ she can save pocket money or scholarship and utilise it
effectively. A young person who has just started working and receiving
a salary, would require a banking service, complex investment
products (given that youth are more inclined to risk-taking and are
open to experimentation) and remittance services that would enable
him/ her to send a portion of earnings to parents who are not able to do
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Financial Literacy Awareness

as much physical labour as they could earlier. As time progresses and

the individual gets married and starts a family, he/ she is required to
think about safer financial products and longer term investments. His/
her dependency ratio is highest at this point both children and
parents are dependent on the individual. As the individual becomes
older, simple banking services are required to access remittances
transferred by children, and welfare transfers from thegovernment.
Considering all of these specific financial services requirements at
various junctures in life, four teachable moments can be identified:
school-going child (grown up enough to understand money and
saving), youth (stepping into employment), middle-aged (married, and
starting a family), and old age. These are the specific stages of
transition, when the need for financial products/ services takes a leap
and it is crucial to make the right financial decisions. Thus, these
moments are best suited for receiving and benefitting from customized
money management.

Financial Literacy Awareness

Financial Literacy Awareness

Table 1 maps the four teachable moments with the associated

attributes, along with the work that has been done so far in terms of
implementation of financial literacy initiatives and assessment of the
impact of the initiatives. Analysing each of the stages independently
would throw light on the way forward in designing financial literacy
modules. A cross analysis of these, however, highlights the fact that
there is little or no commonality among them and each is required to
be taught with different instruments varying in content, delivery
mechanism and need for innovation.
Note: This table is based on findings and learning from various studies
conducted by IFMR-LEAD on the subject of financial literacy.
To elaborate, the cognitive ability of a person starts developing when
he/she starts going to school. At this stage, an individual is immature
with low or no understanding of emotions and concept of time. They
take time to solve problems that require abstract thinking. They are
usually attracted to things that are colourful, and are significantly
influenced by games. Learning by doing is the mantra that drives
childhood. Kids these days are also involved in social networking.
Although no research has been done to study the impact of any kind of
financial literacy training on school-going kids, instruments like comic
books and concept of saving in a piggy bank seem promising, given
the attributes of their age.
Similarly, a youngster just stepping into employment is characterised
by good sensory abilities and memory skills. Reasoning and logical
thinking are fully developed. At this stage, an individual is highly
ambitious and feels a need for independence, self-reliance and
freedom from authority. Acceptance among peers is equally essential.
Keeping these in mind, some teaching mechanisms like money games,
simulation games and soap operas have been designed and adopted
globally, yielding positive results on financial behaviour of the youth
(Tufano et al 2010).
Skipping to the last teachable moment, no financial literacy
programme focuses on the elderly, and the research on developing a
module for this age group has also been nil. There have, however,
been government initiatives such as the Adult Literacy Programme
that could be used to impart financial education. For such a financial
literacy programme to be designed, attributes like divided attention,
loss of recent memory and slower response to sensory stimulation
need to be considered. Also, their parental experience and affinity to
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religious events and activities could be leveraged upon. Occasions of

interest to this age group should be used to bring them together and
learning should be derived from discussions of their experiences in
life.
In contrast to the work in the sphere of financial literacy that has been
done with school-going kids, youth and elderly, various interventions
have been developed and implemented for middle-aged people. This
segment of the population is intellectually sharp but with a relatively
slower reaction time as compared to youngsters. People in this bracket
take time to learn new things but their ability to do so does not change.
They mostly understand things that they can relate to their lives,
families, jobs, adversities etc. A lot of innovative methods have been
adopted to teach them best financial practices, some aligning with
their attributes and others ignoring them. Most of the studies that have
been conducted so far with this particular group illustrate an impact on
financial awareness and knowledge of the participants but limited
effect on their financial behaviour, which in fact, is the key intended
outcome of any financial literacy programme (Cole et al. 2009, Cole
and Shastry 2009). Some implementers believe that incentives, like
bundling financial literacy training with a financial product (for
instance, credit to start a small business) that help the participants to
practice what is preached (fund management, book keeping, inventory
management, etc.) and to visualise the impact of the training for
themselves (increased revenue and profits), are more likely to be
received well and to create an impact. Scientific evidence for the
above is, however, lacking.
One size does not fit allEven though there is no blueprint to a
successful financial literacy programme as yet, taking a cue from the
above mentioned aspects is essential to come closer to designing one.
The efforts that are being put in by stakeholders to empower people
while making them financially literate are commendable but need to
be more focused and customised as the rule of one size fits all
doesnt seem to apply in this sphere. Providing the right advice at the
right time and with the right approach is the key and this indicates vast
scope for work and innovation in this field.

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Importance of Financial Literacy

The recent global economic downturn has served to highlight our
deficiencies in this area and has shifted focus to the need for financial
education.
Self Assessment Tools
A simple questionnaire that establishes your current financial status is a
great place to start. This will provide you with a greater understanding of
what it is you do know and what it is you need to learn about money
management.
When properly structured, self-assessment tools can assist you to develop
your personal financial goals and to acquire a better sense of what you
will need to make more informed financial choices.
Money Management Basics
Mastering money management basics is crucial. Learning how to
formulate and live within a monthly budget, building savings and creating
wealth, planning for future financial needs, understanding how insurance
products work are all key areas that should be addresed.
Financial literacy is important because it benefits consumers, the financial
system and the economy. Financial literacy causesconsumers to behave in
a particular way, and develop particular attitudes concerning money.
Financial literacy enables people to makebetter financial decisions, to
appreciate their rights and responsibilities as consumers of financial
products, and to understand andmanage risk. Thus, personal financial
literacy ensures and prepares an individual to manage money, credit, and
debt effectively. Betterinformed consumers make more effective choices
and more appropriate decisions. They are less likely to be mis-sold or
mis-buyproducts and services.
The benefits of financial literacy to the household will also bring benefits
to the economy and the financial system which are asfollows:
Benefits to Consumer
Increased saving and retirement planning
More realistic assessments of financial knowledge by consumers
Investing and choosing the right financial products with
confidenceConsumer rights and regulatory intervention
Financial efficiency in the form activity in financial market and debt
management
Benefits to Financial System
Greater competition, innovation and quality products
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Disciplined and broader financial market.

Less social security burden.
Benefits to Community
Financial inclusion
Understanding government financial policies

Determinants of financial literacy in an Individual

An individual is said to be financially literate if he/she is able to perform
the following:
Financial knowledge and understanding: The individual should be
aware of the products available in the market. Should possess adequate
knowledge about the basics of the products, the related concepts,
consumer rights of such products and its use.
Choosing appropriate products: Should be able compare similar
products and choose the product which suits their requirement. Financial
knowledge about the various products would enable this.
Financial Planning: The intensity to save and plan for their retirement
life should be clear. Investing in proper avenues or saving through various
investment plans shows their attitude and behaviour towards financial
matters. The studies listed above shows that the financial attitude and
behaviour is highly influenced by financial knowledge possessed by an
individual.
Day to day money management: Financial literacy helps an individual
to have control over his financial matters. It enables an individual to
frame appropriate budgets which in turn helps them to track his finances
and meet the ends.

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Scenario in India
While we have become marginally better at saving and planning for the
unexpected and retirement, basic money management still remains a
weak point, shows a recent survey. In terms of overall financial literacy,
India is at the bottom among 16 countries in the Asia-pacific region with
59 index points, according to the annual MasterCards index for financial
literacy. Only Japan fared worse with 57 points.
The index is based on a survey conducted between April 2013 and May
2013 with 7,756 respondents aged 18-64 years.
The survey polled consumers on three aspectsbasic money
management (50% weight), financial planning (30% weight) and
investment (20% weight)to arrive at the overall financial literacy index.
On individual parameters, India scored 50 index points in basic money
management, which was lowest among 16 countries. With respect to
financial planning, which involves savings and planning for the
unexpected and retirement, India showed improvement from the last
round of survey and scored 76 index points and for investments it scored
58, one index point lower compared with last year.
The report states that for Indians, the lack of ability to keep up with
bills, set money aside for big item purchases and to pay off credit cards
fully could be due to a lack of surplus cash, resulting from the fact that
income levels are not high enough to cover expenses. According to
Desmond Choong, an external analyst who works with MasterCard on
indices and surveys, this can be attributed to inflation. The Consumer
Price Index-based inflation has been around 9-10% for the last two years.
Interestingly, the younger lot seems to be slightly more financially
proficient. The financial literacy scores for Indians aged 30 and above
was 59 compared with 61 for those under 30 years of age. This was an
exception to all the other Asia-Pacific countries where the older cohort
had clearly better financial literacy scores than the younger cohort except
for Indonesia where it was almost a tie between the two segments.
However, given the small sample size and locations chosen for the
survey, it may not be a true reflection of the things on ground. The
sample is not too big and India is a large country with diverse lifestyle
approaches. So I am not sure how far will this be true for pan-India, says
Ranjeet S. Mudholkar, vice-chairman and chief executive officer,
Financial Planning Standards Board India.
The survey was conducted with respondents at the urban level, so the
results are particularly for urban Indians but may to a lesser extent
reflect the situation as well for rural India, says Choong.
Mudholkar, however, says that the survey can give a good idea from a
country on country perspective. For instance, Hong Kong and Singapore

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are comparable in terms of per capita income, population and purchasing

power parity but India operates on a very different sca

STUDY ON FINANCIAL LITERACY IN INDIA BY

EXPERTS
The following section gives the general studies made related to financial
literacy:
Studies by Marcolin and Abraham (2006); Schuchardt et al., (2008);
Remund (2010) and Huston (2010) found that despite the rapid growth of
interest in and funding for financial literacy and financial education
programs, it remains the case that the field of financial literacy has a
major obstacle to overcome: the lack of a widely disseminated measure of
financial literacy, developed through rigorous psychometric analyses.
Michael (2009) argues that a lack of financial literacy can hamper the
ability of individuals to make well-informed financial decisions. For
people who exhibit problems with financial decision making, financial
advice has the potential to serve as a substitute for financial knowledge
and capability.
Agarwalla Sobhesh Kumar, Barua Samir, Jacob Joshy, Jayanth R. Varma
(2012) conducted a study among 3000 individuals, and found that
financial knowledge among Indians is very low than the International
standards. But the financial behaviour and attitude of the employees and
retired seems to be positive. The financial knowledge among the women
are marginally high than the men. Greater access to consumption credits
has influenced the financial behaviour of young employees.
Financial literacy was examined among individuals which showed that
the financial literacy is low and less than one third of the young adult
possess the basic knowledge of interest rates, inflation andrisk
Diversification. Financial literacy was strongly related to socio
demographic characteristics and family financial sophistication.
Specifically, a college educated male whose parents had stocks and
retirement savings was about 45 percentage points more likely to know
about risk diversification than a female with less than a high school
education whose parents were not wealthy (Lusardi, Mitchell and Curto
2006).
Sages and Grable, (2009) in their study found that the individuals who
has the lowest level of financial risk tolerance is the least competent in
terms of financial matters, have the lowest subjective evaluation of net
worth and are less satisfied with their financial management skills. The
level of financial risk tolerance of the individuals determines the financial
behaviour.

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Ansong and Gyensare (2012) conducted a study among 250 UG and PG

University students of Cape Coast reveals that the age and work
experience are positively related to Financial literacy. Also, mothers
education is positively correlated with respondents financial literacy.
But, level of study, work location, fathers education, access to media and
the source of education on money has no influence on financial literacy.
Mandell (2008) made a survey among college students in 2008, Mandell
calculated average accuracy

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INVESTMENT OPTIONS
While some plans accrue short term profits some are long term deposits.
The first step towards investing in Indian market is to evaluate individual
requirements for cash, competence to undertake involved risks and the
amount of returns that the investor is expecting. Below are Top 10
Investment Options in India which assure safe and satisfactory returns
1. Investments in Bank Fixed Deposits (FD)
Fixed Deposit or FD is accrues 9.25% of annual returns for non-senior
citizen, depending on the bank's tenure and guidelines, which makes it's
widely sought after and safe investment alternative. The minimum tenure
of FD is 15 days and maximum tenure is 5 years and above. Senior
citizens are entitled for exclusive rate of interest on Fixed Deposits,
current rate of return is average 10% annual.
2. Investments in Insurance policies
Insurance features among the best investment alternative as it offers
services to indemnify your life, assets and money besides providing
satisfactory and risk free profits. Indian Insurance Market offers various
investment options with reasonably priced premium. Some of the popular
Insurance policies in India are Home Insurance policies, Life Insurance
policies, Health Insurance policies and Car Insurance policies.
Some top Insurance firm in India under whom you can buy insurance
scheme are LIC, SBI Life, ICICI Prudential, Bajaj Allianz, Birla Sunlife,
HDFC Standard Life, Reliance Life, Max NewYork Life, Metlife, Tata
AIG, Kotak Mahindra Life, ING Life Insurance, etc.
3 Investments in National Saving Certificate (NSC)
National Saving Certificate (NSC) is subsidized and supported by
government of India as is a secure investment technique with a lock in
tenure of 6 years. There is no utmost limit in this investment option while
the highest amount is estimated as ` 100. The investor is entitled for the
calculated interest of 8% which is forfeited two times in a year. National
Saving Certificate falls under Section 80C of IT Act and the profit
accrued by the investor stands valid for tax deduction up to ` 1, 00,000.
4. Investments in Public Provident Fund (PPF)
Like NSC, Public Provident Fund (PPF) is also supported by the Indian
government. An investment of minimum ` 500 and maximum INR.
100,000 is required to be deposited in a fiscal year. The prospective
investor can create it PPF account in a GPO or head post office or in any
sub-divisions of the nationalized bank.
PPF also falls under Section 80C of IT Act so investors could gain
income tax deduction of up to ` 1, 00,000. The rate of interest of PPF is

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evaluated yearly with a lock in tenure of maximum 15 years. The basic

rate of interest in PPF is 8%.
5. Investments in Stock Market
Indian Stock market is very fluctuating. A smart portfolio positioned for
long-term growth includes strong stocks from different industries. Before
investing in stock market one should be prepared to assume risk
equivalent to sum invested in the market. Investing in share market yields
higher profits. Influenced by unanticipated turn of market events, stock
market to some extent cannot be considered as the safest investment
options. However, to accrue higher gains, an investor must update himself
on the recent stock market news and events.
6. Investments in Mutual Funds
Mutual Fund firms accumulate cash from willing investors and invest it
in share market. Like stock market, mutual fund investment are also
entitled for various market risks but with a fair share of profits. One
should select mutual fund schemes based on all or some of the following
criteria:
Long term and Short Term Performance
Consistency in Returns
Performance during bullish and bearish phases
Fund Managers performance with the fund's operations
A simple way to select a mutual fund scheme to invest in is to select a 5
star or 4 star rated fund from one of the reputed rating agencies
7. Investments in Gold Deposit Scheme
Controlled by SBI, Gold Deposit Scheme was instigated in the year 1999.
Investments in this scheme are open for trusts, firms and HUFs with no
specific upper limit. The investor can deposit invest minimum of 200 gm
in exchange for gold bonds holding a tariff free rate of interest of 3% 4% on the basis of the period of the bond varying with a lock in period of
3 to 7 years.
Moreover, Gold bonds are not entitled of capital gains tax and wealth
tariff. The sum insured can be accrued back in cash or gold, as per the
investor's preference.
8. Investments in Real Estate
Indian real estate industry has huge prospects in sectors like commercial,
housing, hospitality, retail, manufacturing, healthcare etc. Calculated
realty demand for IT/ITES industry in 2010 is estimated at 150mn sq.ft.
around the chief Indian cities. Termed as the "money making industry",
realty sector of India promises annual profits of 30% to 100% through
real estate investments

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9. Investments in Equity
Private equity is a type of asset consisting of equity securities in private
companies that are not publicly traded on stock exchange.
A private equity investment will generally be made by a private equity
firm, a venture capital firm or an angel investor.
Private Equity is expanding at a fast pace. India acquired US $13.5 billion
in 2008 under equity shares and featured among the top 7 nations in the
world. In 2010, the total equity investment is predicted to increase upto
USD 20 billion. Indian equities promise satisfactory returns and have
more than 365 equity investments firms functioning under it.
As ranked by the PEI 300, the 10 largest private equity firms in the world
are:
1.TPG Capital
2.Goldman Sachs Principal Investment Area
3.The Carlyle Group
4.Kohlberg Kravis Roberts
5.The Blackstone Group
6.Apollo Global Management
7.Bain Capital
8.CVC Capital Partners
9.First Reserve Corporation
FINANCIAL EDUCATION
An increased need for financial education is felt in both developed and
developing countries. In developed countries, the increasing number of
financial products, its complexity, importance of retirement savings,
increasedgrowth of secondary market has made the imparting of financial
education imperative for all age groups, including students so that
individuals are educated about financial matters as early as possible in
their lives. In thedeveloping countries, the growing number of investors,
technically advanced financial markets, liberalisedeconomy etc.
necessitates imparting of financial education for better operation of
markets and economy and inthe interest of investor. Further imparting of
financial education is international concern due to growth ofinternational
transactions, international financial instruments like ADR, GDR, IDR
etc., mobility of individuals from one country to another etc.
Components of Financial Education
The importance of starting now!
Time value of money and compound interest.
Planning and budgeting.
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Credit and debit.

Investment and savings.
Implication of taxes.
Protecting your money
INITIATIVES TAKEN SO FAR ON FINANCIAL LITERACY IN
INDIA
RBI's initiatives
Reserve Bank of India has undertaken a project titled "Project Financial
Literacy". The objective of this project is to disseminate information
regarding the central bank and general banking concepts to various target
groups,including school and college students, women, rural and urban
poor, defense personnel and senior citizens.The project envisages a multi
pronged approach. The project has been designed to be implemented in
twomodules, one module focusing on the economy, RBI and its activities,
and the other module on general banking.The material is created in
English and other vernacular languages. It is disseminated to the target
audience withthe help of banks, local government machinery, schools and
colleges through presentations, pamphlets, brochures,films and also
through RBI's website.
SEBI Initiatives
Securities Exchange Board of India has embarked financial education on
a nationwide campaign. To undertake financial education to various target
segments viz. school students, college students, working executives,
middleincome group, home makers, retired personnel, self help groups
etc., SEBI has empanelled Resource Personsthroughout India.
The Resource Persons are given training on various aspects of finance
and equipped with theknowledge about the financial markets. These SEBI
Certified Resource Persons organise workshops to thesetarget segments
on various aspects viz. savings, investment, financial planning, banking,
insurance, retirementplanning etc.Investor education programs are
conducted by SEBI through investor associations all over the country.
Regionalseminars are conducted by SEBI through various stakeholders
viz. Stock Exchanges, Depositories, MutualFunds Association,
Association of Merchant Bankers etc. SEBI has a dedicated website for
investor educationwherein study materials are available for
dissemination. SEBI also publishes study materials in English
andvernacular languages. Under "Visit SEBI programme, School and
college students are encouraged to visitSEBI and understand its
functioning. SEBI has recently set up SEBI Helpline in 14 languages

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wherein througha toll free number, investors across the country can
access and seek information for redressal of their grievancesand guidance
on various issues.

Ministry of Corporate Affairs(MCA) Initiatives

Financial literacy allows to fully appreciate opportunities and associated
risks, take informed decisions and participate actively in the economic
growth story of the country by converting saving into investments.
Ministry ofCorporate Affairs (MCA) has a dedicated approach for
empowering investors through education and awarenessbuilding.
MCA on 27th September, 2007 launched a website www.iepf.gov.in. It
provides information about IEPF and the various activities that have been
undertaken/ funded by it. This website provides information on various
aspectssuch as role of capital market, IPO investing, Mutual Fund
Investing, Stock Investing, Stock Trading, DepositoryAccount, Debt
Market, Derivatives, Indices, Indices (comic strip), Index Fund, Investor
Grievances & Arbitration(Stock Exchanges), Investor Rights &
Obligations, Dos and Donts etc.Ministry of Corporate Affairs has taken
various initiatives to educate investors, particularly, since 2001, the
Investor Education and Protection Fund (IEPF) has been working for
educating the investors and for creating greater awareness about
investments in the corporate sector.

IRDA'S Initiatives on Financial Education

Insurance Regulatory and Development Authority has taken various
initiatives in the area of financial literacy. Awareness programmes have
been conducted on television and radio and simple messages about the
rightsand duties of policyholders, channels available for dispute redressal
etc. have been disseminated throughtelevision and radio as well as the
print media through sustained campaigns in English, Hindi and 11 other
Indian languages.
IRDA conducts an annual seminar on policy holder protection and
welfare and also partiallysponsors seminars on insurance by consumer
bodies. IRDA has got a pan India survey on awareness levelsabout
insurance carried out through the NCAER in a bid to improve on its
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strategy of crating insurance awareness.IRDA has also brought out

publications of 'Policyholder Handbooks' as well as a comic book series
on insurance.A dedicated website for consumer education in insurance is
on the verge of launch IRDA's Integrated Grievance Management System
(IGMS) creates a central repository of grievances acrossthe country and
provides for various analyses of data indicative of areas of concern to the
insurance policyholder.

PFRDA Initiatives on Financial Education

The Pension Fund Regulatory and Development Authority, India's
youngest regulator has been engaged in spreading social security
messages to the public. PFRDA has developed FAQ on pension related
topics on its
web, and has been associated with various non government organizations
in India in taking the pension services to the disadvantaged community.
PFRDA's initiatives have become more broad-based with direct mass
publicity on NPS - both as individual model through POPs and group
models through Aggregators. PFRDA has issued advertisements in print
mediaand electronic media through radio and television. PFRDA
appointed intermediaries are called Aggregators whoare directly
responsible for pension awareness mostly in vernacular languages and in
line with socio-economic sensibilities.
Market players Initiatives on Financial Education
Commercial banks are increasingly realizing that they are missing out on
large segment of financially illiterate and excluded segment of
prospective customers. Also, in view of the national emphasis on
electronic benefit
transfer the commercial banks have initiated various measures for
creating awareness through Financial Literacy and Counseling Centers
and Rural Self Employment Training Institutes on financial literacy. The
objective of
these centers is to advise people on gaining access to the financial system
including banks, creating awareness among the public about financial
management, counseling people who are struggling to meet their
repaymentobligations and help them resolve their problems of
indebtedness, helping in rehabilitation of borrowers indistress etc. Some
of these credit counseling centers even train farmers/women groups to
enable them to starttheir own income generating activities to earn a
reasonable livelihood. Even top management of commercialbanks is

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undertaking Outreach visits to villages with a view to spread financial

literacy. Similarly, many Stock Exchanges, Broking Houses and Mutual
Funds have initiatives in the field of financial education that
spawnsconducting of seminars, issuance of do's and don'ts, and
newspapercampaigns. Insurancecompanies too, carry out campaigns and
other educational activities for generic education in insurance

Financial Inclusion
Financial inclusion or inclusive financing is the delivery of financial
services at affordable costs to sections of disadvantaged and low-income
segments of society, in contrast to financial exclusion where those
services are not available or affordable.
Why Financial Inclusion in India is Important?
The policy makers have been focusing on financial inclusion of Indian
rural and semi-rural areas primarily for three most important pressing
needs:
1. Creating a platform for inculcating the habit to save money The
lower income category has been living under the constant shadow of
financial duress mainly because of the absence of savings. The absence of
savings makes them a vulnerable lot. Presence of banking services and
products aims to provide a critical tool to inculcate the habit to save.
Capital formation in the country is also expected to be boosted once
financial inclusion measures materialize, as people move away from
traditional modes of parking their savings in land, buildings, bullion, etc.
2. Providing formal credit avenues So far the unbanked population
has been vulnerably dependent of informal channels of credit like family,
friends and moneylenders. Availability of adequate and transparent credit
from formal banking channels shall allow the entrepreneurial spirit of the
masses to increase outputs and prosperity in the countryside. A classic
example of what easy and affordable availability of credit can do for the
poor is the micro-finance sector.
3. Plug gaps and leaks in public subsidies and welfare programmes
A considerable sum of money that is meant for the poorest of poor does
not actually reach them. While this money meanders through large system
of government bureaucracy much of it is widely believed to leak and is
unable to reach the intended parties. Government is therefore, pushing for
direct cash transfers to beneficiaries through their bank accounts rather
than subsidizing products and making cash payments. This laudable effort
is expected to reduce governments subsidy bill (as it shall save that part
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of the subsidy that is leaked) and provide relief only to the real
beneficiaries. All these efforts require an efficient and affordable banking
system that can reach out to all. Therefore, there has been a push for
financial inclusion.
What are the steps taken by RBI to support financial inclusion?
RBI set up the Khan Commission in 2004 to look into financial inclusion
and the recommendations of the commission were incorporated into the
mid-term review of the policy (200506) and urged banks to review their
existing practices to align them with the objective of financial inclusion.
RBI also exhorted the banks and stressed the need to make available a
basic banking 'no frills' account either with 'NIL' or very minimum
balances as well as charges that would make such accounts accessible to
vast sections of the population.
Of the many schemes and programmes pushed forward by RBI the
following need special mention:
A. Initiation of no-frills account These accounts provide basic
facilities of deposit and withdrawal to accountholders makes banking
affordable by cutting down on extra frills that are no use for the lower
section of the society. These accounts are expected to provide a low-cost
mode to access bank accounts. RBI also eased KYC (Know Your
customer) norms for opening of such accounts.
B. Banking service reaches homes through business correspondents
The banking systems have started to adopt the business correspondent
mechanism to facilitate banking services in those areas where banks are
unable to open brick and mortar branches for cost considerations.
Business Correspondents provide affordability and easy accessibility to
this unbanked population. Armed with suitable technology, the business
correspondents help in taking the banks to the doorsteps of rural
households.
C. EBT Electronic Benefits Transfer To plug the leakages that are
present in transfer of payments through the various levels of bureaucracy,
government has begun the procedure of transferring payment directly to
accounts of the beneficiaries. This human-less transfer of payment is
expected to provide better benefits and relief to the beneficiaries while
reducing governments cost of transfer and monitoring. Once the benefits
starts to accrue to the masses, those who remain unbanked shall start
looking to enter the formal financial sector.
What more is to be done for financial inclusion?
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Financial inclusion of the unbanked masses is a critical step that requires

political will, bureaucratic support and dogged persuasion by RBI. It is
expected to unleash the hugely untapped potential of the bottom of
pyramid section of Indian economy. Perhaps, financial inclusion can
begin the next revolution of growth and prosperity.

HOW TO DEVELOP FINANCIAL LITERACY

It is never too early, or too late, to begin developing financial literacy,
taking control of your finances, and putting yourself on the path to
financial security. Being financially literate allows one to earn more,
spend less, and get the things he or she really wants. To develop financial
literacy at any age, follow these steps.
Become familiar with your household finances
Know how much money you have coming in, how much goes out, and
where it goes. There are several things that you can do to familiarize
yourself with your finances:
1. Review your bank statements. Find out how much of your money
goes into the bank and for what, other than your monthly bills, it
comes out.
2. Go through your monthly bills. You should know exactly whom
you pay each month, for what, and how much you pay them.
3. Scrutinize your credit card statements. Learn how much you pay on
your cards each month, what your total balance is, and how you
use your cards.
4. Track your loans. Know how much you owe and how long it will
take to pay if off making the regular monthly payment each month.
5. Review investment account statements. Find out where your
money is invested, and how much that investment is earning you
each year.
6. Obtain a copy of your credit report and read it. You are entitled to
one free copy each year from each of the three credit reporting
agencies
Set a financial goal.
Financial responsibility is easier when you are working towards a goal.
Decide to remodel the bathroom, purchase a new vehicle, or upgrade your
television set. It does not matter what your goal is, just that it is
something you want for which you will have to save.
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Develop a budget and stick to it.

Once you know how much money you have coming in and going out, and
you have a financial goal, you will need to develop a budget that allows
you to save towards your goal. To develop a budget that you can stick
with:
Keep a record of your monthly spending for several months.
Include groceries, gasoline, clothing, lunches and dinners out, dry
cleaning, school expenses, etc. You want to be sure that your record
is an accurate picture of how you spend your money.
Write a spending plan using your spending record as a guide,
eliminating unnecessary expenses, and decreasing those, which
may be too high.
Revise your budget as necessary. When monthly bills change or are
eliminated, your financial goals become different, or your income
increases or decreases, a change in the budget is necessary. Your
budget must be flexible in order for you to stick with it.
Discuss finances openly and honestly, and stay involved.
Generally, one spouse is in charge of the finances, but that is no excuse
for the other to not know where the money goes, and be involved in
financial decisions. You do not have to know where every dime your
spouse spends goes, nor does he or she need to know where every dime
you spend goes, but you should both be aware of your financial situation
and be involved in the big financial decisions.
Learn the difference between good debt and bad debt.
Not all debt is created equal. Here is how to tell the good debt from the
bad debt:
Debt, which creates value and helps you to build wealth, is good
debt. The most common example of good debt is a mortgage. The
value of the home increases as the amount of the debt decreases
and you build equity in the home. School loans are also considered
good debt because of the potential value of a degree you earn
acquiring the debt.
Debt, which continues to increase, as the item purchased with it
decreases, is bad debt. Credit cards are the number one bad debt
among consumers. The items purchased on the card decrease in
value, while the interest you are charged on them increases each
month you do not pay off the credit card. Car loans are also bad
debt because the value of the car decreases more quickly than the
principle of the loan.

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Avoid common money management mistakes.

There should be more money coming in than there is going out.
Oftentimes, simple things people do or do not do, throws that balance out
of whack without them realizing it.
Living on credit. Charging merchandise to credit cards or taking
out loans to purchase large ticket items is not living within your
means. If you are not living within your means, you are incurring
bad debt, which may dig you into a financial hole, of which you
cannot get out.
Not setting financial goals. It may not sound like a huge mistake to
not have a financial goal, but if you have no real reason to manage
your money well, you are not as likely to do it. A financial goal
will give you something to look forward to and work towards.
Calling luxuries items necessities.
Educate yourself on personal finance
Look for organizations in your community that can help you learn more
about personal finance, with articles, activities, and classes.
Places to check for information include banks or credit union,
nonprofit housing organizations, employee assistance programs,
and religious organizations.

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PRIMARY DATA
The study has been conducted among undergraduate students in Mulund
College of Commerce with a view to understand the level of financial
literacy awareness by using a questionnaire.
ASSUMPTION: The study was conducted under the assumption that the
students have financial resources in the form of pocket money, Earning or
Savings.
Statement 1: Preparation of budgets
70
60
50
40
NO.OF PPL
TOTAL

30
20
10
0
YES

NO

Option Response
Yes
40
No
60
Statement 2: Pattern of budgeting

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60
50
40
no.ofppl

30

t otal
20
10
0
Always

Answer
Always
Occasional
Never

Occasional

Never

Response
20
50
29

Statement 3: Keeping track of Expense

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60
50
40
30

Series 1

20
10
0
TRACK

DO NT TRACK

Option
Keep track
No track
Cant say
written Record

DNT KNW

WR RECORD

Response
26/100
57/100
7/100
10/100

Statement 4 : Control on expenses

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70
60
50
40
NO.OFPPL

30
20
10
0
No control

Option
No control
Fluctuates
Cant say

Fluctuates

Cant say

Response
30
65
5

Statement 5: Factors instrumental for Saving

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Series 1
70
60
50
40
30
20
10
0

Entertnmt.

Education

Investment

Others

Series 1

Option
Entertainment
Education
Investment
Others

Response
59
9
12
20

*OTHERS- technology, gifts,vacations,marriage.

*entertainment include casual outings, hotel visits, concerts etc.
Statement 6: Sources for seeking assistance in money management.

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50
45
40
35
30
25

Series 1

20
15
10
5
0
Family

Friends

Option
Family
Friends
Banks/Fin. Institution
Internet

Banks/FI

Internet

Response
46
17
14
33

Statement 7: Financial planning observed

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Series 1
60
50
40
30
20
10
0

none

unplanned

planned

some

Series 1

Option

Response

None

15

Unplanned

52

Planned

20

Some

16

Statement 8: Availing credit cards on being approached by Financial

Institutions

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Series 1
60
50
40
30
20
10
0

Yes

no

Refused

Series 1

Option
Yes
No
Refused

Response
36
54
10

Statement 9: Awareness about financial products

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Series 1
70
60
50
Series 1

40
30
20
10
0
All

Option
All
Most
Few
None

Most

Few

None

Response
64
29
6
0

Statement 10: Media that influence information about financial

products

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Series 1
50
45
40
35
30

Series 1

25
20
15
10
5
0
Newspapers

Television

social netwk

Option

Response

Newspapers

26

Television

43

Social networking sites

10

Internet

21

internet

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FINDINGS
The study conducted resulted in the following findings:
1) The students budget on an infrequent basis.
2) The expense control is low and tends to go out of budget.
3) The factors for saving were found out to be short term
expenditures
4) The opinion of Family is very influential in financial
activities and money management.
5) Financial goals are undetermined by many students.
6) The students are less attracted to credit cards.
7) The awareness about financial products is high among
students and television plays a major role in awareness.

RECOMMENDATIONS

1.
2.
3.
4.
5.
6.

Though financial products and concepts are familiarised from

academics, the lack of exposure to financial activities in reality
results in average level of awareness
Arrange Seminars in the College to create financial literacy.
Conduct competitions such as Quiz to draw interest of students
Students should use media like internet to update themselves on
new products and concepts.
Students should read newspapers relating to finance and develop a
keen approach towards money management
Financial Institutions should make more use of Social Networking
sites to create awareness as they have a great outreach.
On a broader level, the University should introduce an academic
subject on financial literacy for all streams like Arts and Science.

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CONCLUSION
The study made on the different aspects of financial literacy and
undergraduate students brings me to a following conclusion:
There is immense need to develop financial literacy awareness in
India.
The Government and Authorities like RBI, SEBI etc are taking efforts
to create financial literacy awareness.
The need to develop financial knowledge in Indian society is low and
measures like Financial inclusion will play a major role in
developing this need.
Parents should take efforts to create sensitivity towards financial
planning and inculcate need for budgeting in children from their
teenage.
The students should change their casual attitude towards finance
knowledge and understand importance of awareness of financial
activities.

BIBLIOGRAPHY

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WEBLIOGRAPHY

39