Financial Literacy's Growing Importance In India: Opportunities And Gaps

Financial inclusion in India is described using the Hindi terms for "capable" (Saksham) and "development" (Unnati). Increasing capacity is a call to action for Indians. This explains why financial literacy classes are so successful. Being financially literate may be the difference between getting trapped in uncontrollable debt, frequently from loan sharks, and emerging victorious by developing profitable small enterprises.

Even though the personal finance market has developed rapidly over the past several years, there is still a need for increased financial literacy to simplify the industry for customers. According to a recent SEBI survey, just 27 per cent of the country's citizens are financially educated. This shows how much more financial awareness is required nationwide, but particularly in Tier 2/ 3 cities and beyond.

Covid has served as a testament to the value of creating a carefully considered financial corpus. Due to unexpected job losses and wage cuts, people have experienced financial hardships, and companies throughout the world have suffered previously unheard-of difficulties. The silver lining is that people now understand how important it is to save money and make investments in order to handle any emergency. Consumers were aware of how good money management may help them safeguard their future and avoid having to deal with unexpected expenses.

Given the exponential rate of digitization in the world and the emergence of fintech firms, a number of digital solutions have been assisting customers with saving and financial literacy. There are several new personal financial applications available that may manage and organise one's spending and investments, encourage disciplined saving, and check and raise one's credit score. Some applications even assist users in locating unwanted subscriptions so they may cancel them and concentrate on saving money. Many of these applications provide tools and techniques for directing investments. These applications are an excellent resource for advising customers on investing possibilities and may be seen as a crucial tool for improving customers' financial literacy. Customers should constantly be aware of the applications' legitimacy, usability, and security before downloading them.

With the current framework of remote and virtual communication, many businesses and entrepreneurs are providing financial literacy electronically. Numerous organisations provide courses that are specifically designed for Indian customers; the courses are thorough and unbiased. These programmes are further divided into sections for women, MSME owners, and entrepreneurs. Financial literacy has been widely adopted in smaller cities thanks in large part to online courses.

Following Covid, there has been a sharp increase in conferences and seminars promoting financial literacy. To assist customers in understanding investing instruments and creating a corpus in accordance with their financial needs, financial institutions, financial platforms, personal finance businesses, and individual financial professionals have organised such virtual events. Young workers' confidence can be boosted by attending such seminars, and women can make better financial judgments.

Investment in a well-balanced insurance portfolio is a vital and never-to-be-forgotten part of personal finance. Customers need to realise that insurance will not only help to secure their families' futures but will also act as a safety net for the financial corpus that is being created. Consumer education regarding the value of insurance and various insurance products is a top priority for both traditional insurance businesses and newer digital insurance providers. Through their tech-based platforms and with the support of a network of insurance advisors, several digital insurance businesses assist clients in selecting the best insurance plans. These tools and frameworks have demonstrated their value in raising the nation's insurance literacy level.

Despite the fact that personal finance has grown in importance over the last several years, there is still a sizable gap in financial literacy. Smaller-town and urban consumers are considerably more at risk when it comes to rising wealth and financial literacy. As a result, both the public and private sectors must work together to improve financial literacy in the nation. In order to connect with customers and close the financial literacy gap in the nation, digital should be employed more and more.

(About the author: Supriya Suri is Vice President – Customer Experience, Home Credit India)

Supriya Suri

Guest Author The author is Vice President – Customer Experience, Home Credit India