Financial Literacy & Awareness: A Vehicle for Financial Inclusion

By

Rik Chakraborty

K J Somaiya Institute of Management Studies & Research

June, 2011

Financial Literacy & Awareness: A Vehicle for Financial Inclusion

By

Rik Chakraborty

Under the guidance of

Smt. Sushma Vij Deputy General Manager Reserve Bank of India

Dr. A.K. Pradhan Lecturer SIMSR

K J Somaiya Institute of Management Studies & Research

June, 2011

Certificate of Approval

We approve this Summer Project Report titled Financial Literacy & Awareness: A Vehicle for Financial Inclusion as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Diploma in Business Administration for which it has been submitted. It is understood that by this approval we do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted. Summer Project Report Examination Committee for evaluation of Summer Project Report

Name

Signature

1. Faculty Examiner

2. PG Summer Project Co-coordinator

Certificate from Summer Project Guides

This is to certify that Mr. Rik Chakraborty, a student of the Post-Graduate Diploma in Business Administration, has worked under our guidance and supervision. This Summer Project Report has the requisite standard and to the best of our knowledge no part of it has been reproduced from any other summer project, monograph, report or book.

Dr. A.K. Pradhan Lecturer SIMSR

Smt. Sushma Vij Deputy General Manager Reserve Bank of India Central Office, Fort Mumbai 30.06.2011

30.06.2011

Abstract Financial Literacy & Awareness: A Vehicle for Financial Inclusion

By Rik Chakraborty

The Indian Banking Sector consists of 80 Scheduled Commercial Banks apart from Regional Rural Banks (RRB), Co-operative Banks and Local Area Banks. The Scheduled Commercial Banks consists of 26 Public Sector Banks, 22 Private Sector Banks and 32 Foreign Banks. There are 84,604 commercial bank branches including RRBs. However, out of 6, 00,000 villages in India only 99,840 villages are covered by banking services as of March, 2011. In other words 83.36% villages in India are not covered by any banking services. With no exaggeration almost half of the population of India is unbanked & rely on informal sources of credit. Lack of infrastructure, literacy, proper financial products, and proper use of technology are some of the reasons for this financial exclusion. More specifically the vulnerable section of the society is totally illiterate & thereby it hinders percolation of banking services to them. Over 25% of Indians continue to live in abject poverty. As a result, Inclusive growth has become a national policy objective of the Union Government. Financial inclusion is an important adjunct in this regard. But to achieve financial inclusion financial literacy has to be promoted in a mission mode. Thus, it can be said that financial literacy is a vehicle for financial inclusion & which in turn shall lead to inclusive growth. As of now in India many organizations in an ad hoc manner are doing great work in promoting financial literacy. But unfortunately neither any consolidated materials are present for promotion of financial literacy nor is any model present. This paper aims to develop financial literacy materials aimed at educating the vulnerable section of the society. Along with the sample financial modules a sample model is developed suitable for promoting financial literacy in India along with a road map. Active discussion with the senior management of Reserve Bank of India, field visits to rural areas & other resources have enabled me to complete this project. This is one of its kind projects & shall be a part of the financial inclusion mission of India in the coming years. I am thankful to Reserve Bank of India & K J Somaiya Institute of Management Studies & Research for providing me this unique opportunity. I dedicate this paper to the millions of poor people of India who are deprived of basic services in every facet of life.

Table of Contents
1. Prelude .............................................................................................................................................. 2 2. Steps taken for Financial Inclusion .................................................................................................. 3 3. Financial Literacy & Awareness as a vehicle for Financial Inclusion ............................................. 4 4. Financial literacy materials ............................................................................................................. 5 4.1 Part I: Bringing People to the Bank ........................................................................................... 5 4.2 Part II: What Banks can do for the people ............................................................................... 17 4.2.1 Module I: General Awareness ........................................................................................... 17 4.2.2 Module II: Saving Facility ................................................................................................ 20 4.2.3 Module III: Credit Facility ................................................................................................ 22 4.2.4 Module IV: Insurance Facility .......................................................................................... 25 4.2.5 Module V: Remittance Facility ......................................................................................... 27 5. Trainers Corner ............................................................................................................................. 29 5.1 Guidelines................................................................................................................................. 29 5.2 Trainers Material ..................................................................................................................... 29 5.3 The Approach ........................................................................................................................... 30 5.3.1 Beginners Course ............................................................................................................. 30 5.3.2 Experts Course ................................................................................................................. 30 5.4 Notes to Trainers ...................................................................................................................... 31 6. A model of spreading financial literacy ......................................................................................... 32 6.1 The Model ................................................................................................................................ 32 6.2 Some Essential Points .............................................................................................................. 33 6.3 Funding & Incentive................................................................................................................. 33 6.4 Demystifying the model ........................................................................................................... 33 7. Sample models and/or success stories ............................................................................................ 37 8. Field Visits ..................................................................................................................................... 39 Visit I .............................................................................................................................................. 39 Visit II ............................................................................................................................................ 40 9. Road Map for Financial Literacy & Awareness............................................................................. 41 10. Conclusion .................................................................................................................................... 42 11. List of Figures .............................................................................................................................. 43 12. References .................................................................................................................................... 44

1. Prelude

There are supply side and demand side factors driving Inclusive Growth. Banks and other financial services players largely are expected to mitigate the supply side processes that prevent poor and disadvantaged social groups from gaining access to the financial system. Access to financial products is constrained by several factors which include: lack of awareness about the financial products, unaffordable products, high transaction costs, and products which are not convenient, inflexible, not customized and of low quality. Financial Inclusion promotes thrift and develops culture of saving and also enables efficient payment mechanism strengthening the resource base of the financial institution which benefits the economy as resources become available for efficient payment mechanism and allocation. The empirical evidence shows that countries with large proportion of population excluded from the formal financial system also show higher poverty ratios and higher inequality. If we are talking of financial stability, economic stability and inclusive growth with stability, it is not possible without achieving Financial Inclusion. Thus, financial inclusion is no longer a policy choice but is a policy compulsion today. And banking is a key driver for inclusive growth. However, we must bear in mind that apart from the supply side factors, demand side factors, such as lower income and /or asset holdings also have a significant bearing on inclusive growth. Owing to difficulties in accessing formal sources of credit, poor individuals and small and macro enterprises usually rely on their personal savings or internal sources to invest in health, education, housing, and entrepreneurial activities to make use of growth opportunities.
Today we are talking so confidently about achieving universal financial inclusion. It is because of the following reasons:

The focus on inclusive growth which has become the mantra of the times The Information and Communication Technology required by the formal financial sector for penetrating widespread unbanked areas in a cost effective way is now available; The realization that the Poor is Bankable. FMCG companies, telecom companies and other retailers are all concentrating on the untapped rural markets for growth. Formal financial sector players also have realized that vast untapped excluded areas have growth opportunities not only for low cost deposits/funds but also for other products such as microcredit, microinsurance, and micropension etc.

(Source: Address delivered by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India at the National Finance Conclave 2010 organised by KIIT University on November 27, 2010 at Bhubaneswar.)

2. Steps taken for Financial Inclusion

Banks are asked to formulate a board approved Financial Inclusion Plan (FIP) for the next three years. FIPs must be integrated with the normal Business Plans of the banks. Banking to the poor is a viable business opportunity but a costbenefit analysis needs to be done by the banks to make Financial Inclusion congruent with their Business Models. Banks must view Financial Inclusion as a viable Business Model. Banks must view Financial Inclusion as a huge business opportunity and perfect their Delivery Models. BC based delivery model has been made more flexible and inclusive. For effective implementation of the Financial Inclusion strategies, banks must fix technology aspects first including completion of Core Banking Solution (CBS) in all their branches and those of sponsored RRBs, and seamless integration of frontend devices with the backend systems. Without this, it would not be possible to scale up the activities. There is a need to increase the bouquet of products currently being offered. During discussions on their FIPs, banks have been advised to provide a minimum of four products to the account holder, viz: a) A savings cum overdraft account b) A pure savings account, ideally a recurring or variable recurring deposit c) A remittance product to facilitate EBT and other remittances, and d) Entrepreneurial credit products like a General Purpose Credit Card (GCC) or a Kisan Credit Card (KCC) Apart from these minimum basic products, banks can offer any other product like insurance, mutual funds, etc. to the account holders. On the issue of coverage, for a village to be considered covered by banking services, either a bank branch has to be present or a BC has to be visiting/present in that village. There must be a bifurcation between villages with more than 2000 population and those with less than 2000 population. The plan needs to cover in an integrated manner both categories of villages. The name of the BC / branch covering a particular village needs to be indicated on the banks website. Special focus on Financial Inclusion at Urban and Metro centers through a functional approach. Involve all the stakeholders in the process. Governments, both Central and State, NGOs, technology vendors, Industry Associations, Insurance and Mutual Fund companies, society at large RBIs efforts have been to remove all regulatory bottlenecks for facilitating greater Financial Inclusion.

3. Financial Literacy & Awareness as a vehicle for Financial Inclusion

India's population as on 1 March 2001 stood at 1,028 million. For the purpose of census 2001, a person aged seven and above, who can both read and write with understanding in any language, is treated as literate. A person, who can only read but cannot write, is not literate. The results of 2001 census reveal that there has been an increase in literacy in the country. The literacy rate in the country is 64.84 per cent. However, no such comprehensive data exists about the financial literacy. It has to be kept in mind that the definition of financial literacy varies with the target audience. For example, when the target audience is educated & upwardly mobile middle class then financial literacy aims to sensitize them with regards to the intricacies of various financial products. But when the target audience is the marginalized & vulnerable section of the society living under abject poverty then the goal of financial literacy shifts to sensitize them on the very basic aspects of finance. According to a 2005 World Bank estimate, 41.6% of the total Indian population falls below the international poverty line of US$ 1.25 a day. Most of them have no fixed source of income & are economically & socially vulnerable. In recent years, as delineated above, Indian government has aimed to bring all and sundry under the ambit of financial services. The major roadblocks in this regard are: Lack of financial literacy & awareness Lack of any single model for dissemination of such knowledge Lack of synergy among SHG, NGO, Banks & Government

Many organizations in an ad hoc manner are doing great work in spreading financial literacy. However, the impact is not felt in a significant manner. The Business Correspondent (BC) model is gaining popularity in India & they are also used for spreading financial literacy. However, in many cases neither the BCs are provided with appropriate training aids nor the banks are doing any reinforcement learning for the BC & the local population. This paper aims to put forward a practical model of spreading financial literacy. The structure of the paper is given below: Financial literacy materials o In simple way banking concept is explained to the vulnerable section of the society o Next in 5 modules viz. General awareness, Saving Facility, Credit Facility, Insurance Facility & Remittance Facility we try to sensitize the rural & urban poor on the various aspects of finance. The modules are quite succinct & written in a FAQ style Trainers material o This section has guidelines, resources & methodology for imparting the above modules A model of spreading financial literacy o A simple model is proposed to spread financial literacy Sample models and/or success stories o A quick review of some prominent efforts made by some institutions with regards to implementing financial inclusion Road Map o A final closing section giving road map for promoting financial literacy & awareness 4

4. Financial literacy materials

4.1 Part I: Bringing People to the Bank
Why do you think that God have made some people very rich & most people very poor? God has given equal natural resources, mental & physical capacity to each & every person. Yet we find some persons very rich & happy & most poor & unhappy. Have you ever thought about the possible reasons? Typically we blame everyone for our condition. But do you know that the real person to blame is no one except Y-O-U-R-S-E-L-F. But most of you work very hard & are sincere. What more can one ask?

You people work for money but the rich get their money work for them . Let us take a
simple example, consider two brothers Ram & Shyam. Ram is very happy & rich. Shyam is very unhappy & poor. Most importantly both of them earn the same amount Rs 2000. But still at the end of the month Shyam borrows from Money lenders, vishi, relatives. But Ram never borrows from them. We shall shortly look into the Ram & Shyam story. Life Line Financial Needs

Fig: 1

Life Line Financial Needs

Believe it or not the above are the events that happen in every persons life irrespective of whether he is a crorepati or people like you. Each such event triggers the need of taking financial assistance from some external source. But self-help is the best help thus, before taking external financial assistance you need to know about financial planning.

What is financial planning? Many of you think that the only way to increase your income is to work more. Many of you work in double shifts. But just reflect over this statement:

Money not spent is money saved resulting in increased income

Now you may think that by not spending money you shall have to face hardship. But it is completely baseless. You can maintain or even enhance your current lifestyle and still be able to increase your income through saving. The way of doing this is known as financial planning.

Differentiating between what you need & want Saving Making your money work for you

Fig: 2 Simple perspective of Saving

In the past 6 months how many cups of tea have you drunk? If every day you drink 4 cups of tea then in the past 180 days you have drank 720 cups of tea. Say each cup of tea cost you Rs. 4 then the total cost is Rs 2,880. Just pause & think whether 4 cups of tea is required in a day. Had you drunk 2 cups of teas every day then the expenses would have been Rs 1,440 & you have saved an equal amount Rs 1,440. 4 cups of tea is what you wanted but basically you needed 2 cups of tea. Financial planning shall enable you to differentiate between need & want & shall help in saving.

Learning is: Money saved is money earned Why moneylenders are rich? Most of you borrow money from money lenders. Say the moneylender has Rs 1000 & lends money to 5 of you. Say each one of you borrows Rs 200. The condition is to repay within 1 month. He charges Rs 50 as interest. Each one of you work hard & after 1 month return him Rs 250 i.e. principal & interest. Now, moneylender has Rs 1,250. He has earned Rs 250. Now wait it is your sweat & blood which made the moneylender earn Rs 250. In fact, he didn't work for the money rather made his money work for him. The result is in front of you: He is getting richer everyday & you poorer every day.

Learning is: Work for your money & better if your money works for you

How can the money work for me? The moneylenders become rich by lending money to those who desperately need it. They charge heavily for the same. Similarly, you can also lend money to those who need them. But there are problems like, that person may run away with your money, may refuse to pay etc. You do not have the might of a moneylender. Do not worry you can keep your money safely with the banks. Banks are safe, transparent, reliable & convenient to deal with. They shall lend the money to those who need them. Banks shall return you the money along with some extra money. You do not have to worry about anything the bank shall ensure timely payment.

Deposit small amounts everyday, e.g. Rs 20 everyday Deposit a lump sum amount for a fixed period of time, e.g. Rs 1500 for 5 years

Recurring Deposit Bank Saving Fixed Deposit

Fig: 3

Bank Saving in simple terms

Whatever we earn gets spent for daily necessities & many times we need to borrow money from neighbors, relatives or vishis. What can we do? Each one of you fills water in pitcher. Life is like a pitcher with a leak at the bottom of it . The water flowing into the pitcher is your income & the water flowing out of the pitcher is your expenses.

More the flow of water into the pitcher & lesser the flow of water out of the pitcher the sooner it gets filled.
Many of you earn very less & the expenses are more. Just compare this with a pitcher being filled from a source with very weak flow of water & with a large leak beneath. The pitcher shall never get filled rather it shall remain almost empty most of the time. Thus, you people borrow, i.e. asks someone else to pour water into the pitcher to make it full. Those persons in turn charge you heavily. There are two options in front of you: Increase the inflow of water, i.e. increase your income Decrease the outflow of water by making the leak small, i.e. spend on necessities & not on luxury items

Now in the long run even if you put a check on your expenses, to live comfortably you have to increase the income. Now many of you are illiterate or semi-literate & do not have permanent job. Many of you have the potential to start your own business. But lack of money prevents you. Also your current financial health is poor. Many of you borrow from informal sources like: Moneylenders, neighbours etc. But they are not only costly but unreliable. Much better alternative is if you come to a bank. A bank is a safe, reliable, transparent & convenient institution which can help you by lending money on convenient terms.

Start your own business GCC/KCC Meet your day to day household needs Educate your children Buy tools to cultivate your land Build your dream house Education Loan Bank Credit Farm tools Loan

Housing Loan

Fig: 4

Bank Credit in simple terms

Banks as a friend help you to meet your daily needs & start your own business & also assist you to meet your aspirations.

Your Current state

People who do financial planning

People who do financial planning & interact with the bank

Fig: 5

Improvement of Financial Status

"Banks are your best friend & stands by your side in tough times. Best thing is the banks charge quite less than informal sources viz. relatives, friends, moneylenders, vishi, mukhiya etc."

Before coming to a bank

After coming to a bank

Fig: 6

Difference after coming to a bank

Events like death, illness, accident, riot, flood, fire, earthquake, lockout etc happen & the flow of income dries up. What can we do?

How many of you have never got wet in rain? Why you got wet? All of you have got wet in rain & not once but many time. The most common reason is either you never bought an umbrella or forgot to carry one. At times you were so confident that it won't rain as the skies were blue. But to your dismay within next few hours the skies got cloudy & it rained. Remember those days in which getting wet in rain made you sick & you missed your daily wage. What should you do?

Buy an umbrella.

Fig: 7 Insurance as an umbrella

Like rains YOU CAN NEVER PREDICT THE EVENTUALITIES IN YOUR LIFE . The only solution is to carry an umbrella!!!! Banks extend umbrella to you & also to your family at a very less cost.

Fig: 8

Choose the right umbrella

Banks take care of you no matter whatever eventualities or crisis you face. This is known as Insurance

At very affordable cost you can secure your family's & yours future by taking appropriate insurance policy from the banks.

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Insurance helps you to be safe under any eventuality

Fig: 9

Benefit of Insurance

Banks are located far away & cater to the rich only. A lot of paper work is involved in banks. It is better we continue our old habit of going to informal sources even if we have to pay a premium.

Many of you travel few kilometers to fetch drinking water for your family. Shall you fetch dirty water available in your neighborhood & allow your children to drink it? Borrowing from informal sources and/or doing business with them is similar to drinking contaminated water. The only difference being that after several years you shall realize your folly.

11

Banks often come to your doorstep Deal conveniently with moneylenders & regret for the rest of your life

of your life

Accept a little inconvenience & deal with banks & be happy for the rest

Fig: 10

Bank Vs Moneylender

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Do you mean banks shall come to our neighborhood?

Sometimes banks open their branches in your locality

Fig: 11

Bank at your doorstep

Most of the times there shall be someone from banks who shall be a bank representative & shall visit your village. He may also be one among you

USES

Fig: 12

Business Correspondent Model

Banks have come to your doorstep don't miss this opportunity

Banks cater to the needs of all irrespective of their economic stature

13

My only son works in the city. He is security in charge and earns well but the money he sends takes a lot of time. Can the banks do anything? The banks shall help in delivering the money from your son to you in a safe, reliable, convenient & transparent manner.

The banks transfers your money

1 BANK

Bank gets the money from you

2 3

4 5 BANK
Banks at your hometown receives the money

Your family receives the money

You get SMS confirmation

Fig: 13

Remittance Model in simple manner

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BANK

The world is a small place to live!!!

Fig: 14

The world is a small place to live

Banks help you to send money to anyone you want living in any part of the world

The service is low cost, safe & quick as because you are dealing with banks

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Ram & Shyam story

Ram always visits the local bank but Shyam is too lazy to visit the same & often makes fun of Ram. Instead, Shyam often borrows from informal sources & spends lavishly. Ram often used to warn Shyam about this. One day while returning from work Ram found the local moneylender thrashing Shyam. He confronted the moneylender & learned that Shyam has failed to re-pay the debts. Further, Shyam has mortgaged his house & land to the moneylender. He has now come to take possession. In reality Shyam never agreed to mortgage either the home or the land. Further, he never took the amount of loan which the moneylender is demanding. Ram understood what has happened. Shyam never looked into the paper work as he was illiterate like Ram. The moneylender has cheated Shyam. The world in which we live is very tough & heartless. Shyam had to let go the land & house. However, Ram was kind enough to give shelter to Shyam. On one evening Shyam asked how Ram never borrows from informal sources. Ram explained to Shyam that two things he religiously followed throughout his life:

Never spent on things which are not needed Always perform transactions with the banks

Initially Ram had barely two square meals a day. He went to the local bank & applied for a credit. The officer at the bank interacted with him & gave some loan. With the loan amount his household needs were met & he also started the cycle repair shop. Over the last 2 years his economic lot has improved a lot & now he has some left with him. He went to the bank and asked for suggestion. The officer advised him to deposit a part of the money with the bank & start repaying the loan with the rest. Once the current loan is repaid he can take another loan & expand his business. If he fails to timely repay the loan the bank may sever all ties with him. Thus, Ram is very cautious & is keeping track of every rupee spent. Bank is Ram's best friend & losing best friend is always a matter of regret. The officer advised him to deposit a certain amount regularly & told him that at the end of some years the money shall grow. Once Ram starts earning even more he can keep a lump sum amount with the bank. After a certain period of time his money shall grow even more. He also asked Ram to take an insurance cover for his family. Shyam understood the importance of bank & why it is Ram's best friend.

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4.2 Part II: What Banks can do for the people

4.2.1 Module I: General Awareness Any individual on this planet has 3 basic needs, viz Food, Cloth & Shelter. We all aspire to be millionaires but often it is a day dream. Many of you do not have a steady flow of income. Further, the income of many of you is very meager. With every passing day the cost of living is increasing. The price of necessary food items like rice, wheat, sugar, potato, onion etc have increased and shall increase even further. The cost of healthcare is also becoming very high. Many deaths happen due to lack of medical treatment. Even at the subsidized rate it is quite costly to carry on medical treatment. It is very tough to see your near & dear one pass away before your eyes. All of you like any other responsible parent of India aspire to educate your children. You want to see them successful in life & enjoy all the comforts in life that you have missed. Getting your daughter married to an appropriate family is a dream shared by each one of you. But each of these dreams needs money, lots of money. Many of you live in poor conditions. The conditions of your houses are deteriorating with every passing day. After a hard day of work you have to live in houses which become flooded in monsoon, lack privacy & are very small for your family. You aspire for a better house. Many of you have to borrow money for meeting some unforeseen requirements. You have to rely on the local moneylender, who charges very high interest. To repay the debt you borrow again & enter into a vicious debt cycle. It is very common to find your sons repaying the debts that you have taken. Many of you are the sole bread earner for your family. Unfortunately if the sole bread earner dies or meets with an accident the whole family gets ruined. Many of you have migrated to distant lands to earn more. But it is very difficult for you to send money to your families. It is tough to find reliable persons. Often the money reaches late & the family suffers. All your hard work goes waste. But you are not alone; every 2 persons out of 3 in India share these concerns. You are working hard, caring for your family, the government is also trying its best. But why all the efforts are falling short. The reason is that you all have to become aware & take the control of your financials in your hand. Very few of you are literate. But don't think that you cannot take the control of your future. Believe or not all the above concerns can vanish if you become little aware. The government has started a new policy of financial inclusion & many persons like us have joined hands to help you all.

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HIGH COST OF LIVING UNTIMELY DEATH CHILDREN'S EDUCATION

SENDING MONEY

YOUR REQUIREMENTS & CHALLENGES

DAUGHTER MARRIAGE

EXPENSIVE HEALTH CARE BORROWER PRESSURE

PROPER HOUSE

Fig: 15

Your problems from all directions (Samasya Aato disha se)

SAVING FACILITY EASY & AFFORDABLE INSURANCE

GOVERNMENT REGULATION

BANK

REMITTANCE

TRANSPARENT

CREDIT FACILITY SAFETY GUARANTEE

Fig: 16 se)

Your solutions from all directions (Samadhan Aato disha

18

Before Coming to Banks

Spend all that earned in a day

is

After Coming to Banks

Careful spending on the needs & not on the wants Borrow for income generating purposes which in turn shall meet your consumption needs Plan well ahead & save money for such purposes. Also you can take loan from banks to meet such purposes Benefit from the safety, reliability & transparency of banks, your true friend Guidance from the banks & a little effort from you helps in managing the debts & you will repay all your debts before you die & will also leave some saving to your heirs Benefit from insurance & get protected from such events Send money in realtime to your family Lead a life of happiness, wellness & pride

Borrow for consumption need and eat your credit

Borrow heavily in times of festival, marriage, sickness, death etc Fall prey to the debt trap of moneylenders
Sell assets to repay your debt & pass on the legacy of unpaid debts to the heirs Lose assets in disasters like flood, earthquake, riot, fire etc & resort to begging Work hard in remote locations but the money you send to your family takes time to reach & often fails to serve the purpose

Lead a life of misery, poverty & shame

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4.2.2 Module II: Saving Facility What is saving? Sometime the municipal water may come for the whole day & sometime it may not come at all. Do we stop using water? No we do not stop using water, we store water when water is in plenty & use them up when it is scarce. This act is called saving. What is financial saving? Many of you do not have steady income. This means in some month, say you earn Rs 1000 & in the very next month you earn Rs 500. In the month in which you earned more you also spent more on luxury items, say expensive meal, buying household items & clothing which were not essential. This is like wasting water on the day in which water came for all the day. The result is you are left with no water on the very next day in which water has not come. Similarly, if you spend more in the month in which you earn more you have to face great difficulty in the next month, in which you earn only Rs 500. Like storing water in bucket, if you save some money from Rs 1000 then you can use it in the next month. Say, you save Rs 100. Thus, in the next month you have an additional income of Rs 100 & the total income becomes Rs 600. Thus, saving is a form of additional income. Where to save? You can save the extra money in your house. But someone may steal it or you may be tempted to use up the money. You can alternatively keep the money with your local moneylender. But he can cheat you over a long period of time or he may run away with your money. You have a very easy solution at your disposal. You can open a Saving Account with any of the banks in your locality. Benefits of a Saving Account o o o o o o o Easy deposit & withdrawal of money A passbook maintaining all the details of the transactions Safety & transparency The money deposited by you earns interest & the money deposited by you grows You can appoint a nominee, who can claim the money after your death Allows you to have an accumulated fund for a future emergency situation Loan against the deposit

Other types of saving o Fixed Deposit or Time Deposit If you have a lump some money, say you have got bonus or maybe you have inherited a sizable amount say Rs 1000 after the sale of your ancestral land, you can deposit it as a fixed deposit. The durations range from 15 days to 10 years o Recurring Deposit You can deposit monthly a fixed amount of money which you can withdraw at the end of stipulated period of time. Say, monthly deposits of Rs 100 for 5 years. 20

What is Interest? The money which you keep with banks is not kept idle. The banks lend money to other people. Those who borrow money from banks also pay some charge. A portion of that charge is given to you. Say, you deposit Rs 100 with a bank. The bank lends that amount to another person. He pays, say Rs 10 as a charge to the bank at the end of 1 year. As soon as the bank gets the money it gives you a share of it, say Rs 4. This extra income which you get from keeping Rs 100 for 1 year with the bank is known as interest. More precisely, this Rs 4 is known as Saving Interest. The person who has taken the loan of Rs 100 has to give Rs 10 & it is known as Credit Interest.

What if a Bank cheats me? All the banks are regulated by the governmental agencies & they have to keep a huge amount of money with the government. It is very unlikely that banks can cheat you, but, however, in the unlikely event of the banks cheating, you can raise a complaint & rest assured the money shall be returned.

How to operate with the bank? The Business Correspondents (BC) of your locality are carefully chosen by the banks & they are regulated by governmental bodies. They shall guide you through all the banking transactions. On opening a savings account you shall be given a Relationship Card. Verify the authenticity of the BC through his identity card. Insert this in the machine carried by the BC & authenticate through thumb impression. Choose the amount you want to deposit or withdraw. Authenticate again with thumb impression & sign on the receipts generated & keep one receipt with signature of authorized official.

Power of Saving Say, monthly you can afford to save up to Rs 100. If you deposit it in a recurring deposit scheme you may get Rs 7,289 at the end of 5 years. Surely this amount may help to mitigate some of your problems. [Source: http://www.indiapost.gov.in/netscape/5YearsRD.html]

How to keep track of monthly expenses & incomes? A budget helps you control how much money you spend. This helps you save money. The less you spend on little things like movie tickets, gambling or drinking, the more you have to save for big things like farming tools, children's education and healthcare. Say, your average monthly income is Rs 1000. Your expenses are monthly rent (Rs. 100), conveyance (Rs. 50) and food & family expenses (Rs. 800). The excess Rs 50 is extra money left with you & is your monthly saving.

Money Coming In Wage Rs. 1000

Money Going Out Conveyance Rs.50 Rent Rs. 100 Food & Family Expense Rs 800

Saving Rs 50
Total Rs. 1000 Total Rs. 1000

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4.2.3 Module III: Credit Facility What is Credit? Suppose you want to start a small business of your own. The total cost of setting it up is say, Rs 5,000. You are having this plan for the past 2-3 years. As you knew about saving, you have opened a recurring deposit depositing about Rs 100 every month for the past 3 years. Now you have a saving of about Rs 4,000. But still you need Rs 1,000. You borrow the amount from someone & this is known as credit. But the person shall want something in exchange. The amount that he charges is known as interest on the loan. For anything I need or want can I get Credit? The money which you receive as a credit is someone elses hard earned money. Within an agreed period of time you have to give back the money. Now if you have taken the money and wasted it in gambling & drinking then how can you repay him? He may punish you and also in future he may hesitate to lend money to people who really need the money. Thus, always borrow money either for a constructive purpose or when you are absolutely sure that you can repay the loan within the stipulated time frame. What can I do with the borrowed money?

Fig: 17

Vicious cycle of poverty

You people have very low productivity, i.e. the output generated by you is meager. Say, if you are a farmer then the amount generated from selling the crop & dairy yield is very less. As a result of this you people earn less and the entire income goes in food & family expenses. Thus, you have very less saving. Meager saving prevents you from buying better seeds and/or farm tools. Thus, in the next season you people face the same fate. If you borrow money then you can buy better seeds and/or farm tools. As result the output increases, your income and thereby savings increases. Thus, credit gives you a slight push which combined with your honest hard work brings prosperity to you & your family. In the next season you can slowly start re-paying the loan from your increased savings. The local moneylender does this, then why should we go to banks? The moneylender charges very high interest & he may cheat you. He may ask you to sign on blank paper & put any amount against your name. Say, you wanted to borrow Rs. 1,000. He gives you the same amount but on the loan paper he puts Rs. 5,000. Then you become legally liable to pay Rs 5,000 & the interest. Many moneylenders may want you to keep something kept as collateral. 22

What is collateral? The money which you shall borrow is someones money. Say you borrow from the neighborhood moneylender. He may doubt your ability to re-pay the loan. Thus, he may want you to keep something of value with him. Say, for a loan of Rs 1,000 he may want you to deposit something worth Rs 500. As you need the loan you keep the ornaments of your wife with him. The ornaments of your wife serve as collateral. That is if you do not re-pay the loan entirely then he shall forfeit the ornaments. After you repay the loan with the interest the moneylender should return the ornaments. But sometime they may not. Again it may so happen that the business suffered loss & you failed to repay the entire amount on time. Then also he shall keep the ornaments with him.

Do the banks lend? Yes the banks lend money for various purposes. Like the money which you deposit with the bank is in safe hands the loans are also transparent & reliable.

Benefits of availing bank credit. o o o o o o o Much less interest charge Safe, reliable & transparent Strict government regulation Easy loan re-payment facility Credit counseling tailored to meet individual needs Flexible collateral requirement Loans are extended for various purposes

What are the various purposes for which I can avail loan o Starting up a small business o Children's education o House building o Buying of farm tools, like tilling machine or tractor o Consumption loan o Healthcare loans Is a bank loan cheap than the local moneylender? Yes. If you take a loan of Rs 100 from a bank it may charge you Rs 15 as interest at the end of 1 year. But the local moneylender may charge anything between Rs 26 to Rs 1000.

How to understand the interest rate? Say the local moneylender charges you Rs 2 daily on every Rs. 100. Now you typically borrow small amount and also repay in a month or two. But do you know how much you are actually paying? Believe it or not, you are paying Rs 730 for Rs 100 over a period of 1 year. Thus, always consider the interest over 1 year to realize the actual amount you are paying.

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What is multiple borrowing and debt trap? Due to excessive high cost of loan from moneylenders you are not able to repay them. The collaterals also are not sufficient. Thus, you have no option but to borrow more. This is known as multiple borrowing. Like a quicksand with every single passing day you get entangled into more debt. Thus, you get trapped in a debt trap. It is not uncommon that many of you are repaying the loans taken by your fathers' years ago.

How to prevent from falling into a debt trap? o Always take loan from a bank. They are safe, reliable & transparent o You should cut your coat according to the cloth. That means never try to aspire for things beyond your limit. o Take loans for the correct purpose which would be beneficial for your family & you

Shall the bank give loan for anything & everything Every bank shall listen to your requirements & then issue you the loan. The loan must be of good to your family & yourself. The banks lend hard earned money of people like you, thus banks shall lend for constructive purposes only.

Will the bank entertain a small borrower like me & is the process of loan approval easy? The government of India has vowed to make each individually financially independent. The banks are appointed for that purpose only. They shall be glad to have you as a customer. Getting a loan is as easy as getting a mobile connection. However, as the bank is a reliable, safe & transparent institution some paper work is involved. The Business Correspondent (BC) of your locality shall assist you throughout the loan process. If you have a term or recurring deposit with the bank then the loan approval would have been even easier. However, it is not mandatory to have such deposits.

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4.2.4 Module IV: Insurance Facility

What is insurance? Say you are the only breadwinner of your family of 5. Unfortunately you meet with an accident & become incapacitated to perform your usual work. But life shall not stop; your family shall still need all the necessities of life. But how shall you fulfill them? You can visit the local moneylender & take credit from him. But like running water is needed to fill a bucket, running income is required to repay debt. After sometime all the deposits carefully saved by you shall get exhausted in the process of repaying the debt. You shall be left with no money to feed your family. The result: You commit suicide & your family gets wasted. Now, you could blame fate & God but do you know there are people who could have helped you. You carry an umbrella with you to get protected from rain & heat. Insurance is also a type of umbrella which shields you from all types of eventualities.

In which cases do I need insurance? Health and incapacity for work (e.g., illness, disability, accidents either occupational or non-occupational) Life cycle risks (e.g., death, old age) Economic risks (e.g., unemployment, loss of property, crop failure) Natural disasters (e.g., floods, droughts, earthquakes)

How my family shall get benefited? Say, you become seriously ill & doctor advised you to rest for 3 months. Then for 3 months the umbrella shall protect your family from all eventualities. Similarly, say the crops don't grow this year. Again the umbrella shall help you to sail smoothly through the season.

Is insurance very costly? No, the government has several schemes for people like you. Only authorized insurance distributors are allowed to provide insurance coverage to you. However, depending on the amount of coverage the cost of the insurance shall vary.

What is amount of coverage? Like you have umbrellas of different quality & size the insurance schemes are also different. Some umbrellas protect you from very heavy rainfall & are generally little costly. Similarly, if you want to make your family more safe then the cost shall increase.

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The local agent has promised me less costly insurance schemes. Then why go to authorized insurance distributors? Some such agents may give you inferior schemes or may simply cheat you & run away with your money. Surely you shall not like to have a defective umbrella. Like banks the authorized insurance distributors are safe, reliable & transparent.

How to pay for an insurance scheme? There are varieties of payment options & it depends on the scheme you have opted. Generally, you have to pay a fixed amount of money monthly, quarterly or annually till a fixed period of time, say 10 years. Thus, during these 10 years your family & you shall be protected from certain eventualities, say death, illness, unemployment, earthquake etc. Some schemes might give back some money after the expiration of the scheme. Certain schemes give you back the entire money that you have paid.

If I get back the full amount in an insurance scheme, then it is better to opt for deposit schemes, as in deposits I earn interest? Deposit schemes only stores your money & pays you certain extra amount in the form of interest. They won't be able to save you from various eventualities. Further, insurance is like carrying umbrella in anticipation of heavy rainfall or scorching sunshine. There is no guarantee that it shall rain but still you have to carry an umbrella. Remember, many times the sky was clear & you left home without umbrella but got caught up in a heavy downpour. Keep in mind eventualities like death are certain only uncertainty is when they shall strike. If we are not prepared enough then we may not get another chance.

If I & my friend buy the same umbrella we pay the same price, but why we are charged differentially in case of insurance schemes? You buy umbrella for day to day personal use. But an insurance scheme needs to consider the various aspects of you & your family. Say, your friend is very healthy compared to you. Thus, he may not easily die. But you are very sickly and thus you may die soon. The authorized insurance distributors have to bear the risk of protecting you more. Thus, they charge you more.

What if the authorized insurance distributors cheat me? Like banks they are also regulated by the government and thus are safe, reliable & transparent.

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Like carrying an umbrella becomes useless if it does not rain, having an insurance cover & not meeting any eventuality is like wasting money. Just think in the opposite way you don't have any life cover. Your son is a brilliant student & has stood 1st in the district in the board exams. He also got selected in engineering. You have taken a loan for this purpose. But while coming to home from your work you get hit by a truck & die. The result shall be your son abandoning study & joining some petty job, working day in & day out to repay the family debts. In some cases even that may also not be sufficient. Had you an accident cover, then on the unfortunate untimely death of you, your family would have got a lump sum amount which would have sufficed for your family to repay the debts. Your son might have taken a part time job & continued engineering. You decide which one is better.

4.2.5 Module V: Remittance Facility What is remittance? Often to earn a livelihood one has to travel to distant lands. Your family stays behind, but who will feed them? They need money to run the household. You should send money to the family. But the problem is you stay far from your family and thus you cannot personally send the money. Generally there are two options, either you send the money through some person who stays in your locality or through hawala way. A third option of dispatching money through post office in the form of Money Order. This sending of money from a distant location to another location is known as remittance. Okay, so what is the problem? Existing means of remittances have certain problem, viz. o High charge is levied. For example, to send Rs 100 you may have to pay up to Rs 25. o The entire money may not be delivered, say you dispatch Rs 1000, but your family receives Rs 900. Only after you personally visit you shall realize that your trusted sender cheated your family & you. o Even if the person is not cheating you, it takes a long time for the money to reach. Is any solution available? As always the banks as a representative of government has remittance facility. The benefits are: o Real time money transfer. Your family gets money on the same day you send money o Very less costly method o Safe, reliable & transparent 27

Do I need to have a bank account? No you do not require a bank account. You can send the money through designated branch or business correspondent or facilitator. You shall be given a receipt having a certain number printed on it. The recipient has to carry an identity card & the number that you received. Then only s/he shall be given the money.

How many times can I send the money? You can send money as many times you wish.

What are the other benefits of sending money, if I visit my village every month? The requirement of money arises often without giving any notice. It may so happen that suddenly your father falls ill & urgent requirement of money arises. But you cannot visit your village immediately. Thus, you have to avail the services of the remittance feature of banks. On the same day your family shall get the money & your father gets a new life.

Is there any other form of remittance? Say your son is studying in the city & you earn by farming in the village, you can send money to your son through remittance to meet the living & study expenses.

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5. Trainers Corner
5.1 Guidelines
It is not feasible for Banks and/or governments to send their representatives for making the marginalized, poor & vulnerable financially literate. Further, it is also seen that people respond better when one among them is spearheading such initiatives. Thus, the trainers should be selected on the below basis: Individuals like retired bank employees, retired teachers, retired government employees and ex-servicemen, individual owners of kirana / medical /Fair Price shops, individual Public Call Office (PCO) operators, agents of Small Savings schemes of Government of India/Insurance Companies, individuals who own Petrol Pumps, authorized functionaries of well run Self Help Groups (SHGs) which are linked to banks, any other individual including those operating Common Service Centres (CSCs) Care should be taken that the trainers are not Business Correspondents / Facilitators. Even if they are BC / BF then the respective banks should take care that the trainers do not advertise on behalf of the banks The objective of the financial trainers shall be to make the community financially literate. The Lead Banks of the district may appoint the trainers & shall train them on basic financial topics.

5.2 Trainers Material

Trainers Materials

Posters

Lecture

Blackboard

Examples

Movie

Fun Activities

Stories

Role Plays

Discussions

Fig: 18

Sample Trainers' materials

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5.3 The Approach

The target audience is people living on the edge, for them every day is a struggle for existence. Many of them spend the whole day working. They value time the most. Thus, our approach should be two pronged: Beginners Course Experts Course 5.3.1 Beginners Course Objective: To invoke interest among the audience regarding financial aspect of life

Methodology: As the trainer is selected from the community he is well known in the community & also has an understanding of the communitys behavior. S/he shall be using Part I (Page 5) & Part IIs Module I (Page 17). The duration shall be 30 minutes. The aim should be to emphasize on the life cycle needs of a person. Then to emphasize on the 8 requirements & challenges a person of their economic status might face in life. In conclusion the trainer should introduce Banks as the one stop solution for each 8 problems. Delivery: A suitable day should be chosen when most of the community members are present. They have to be summoned to common place, viz. locality municipality school, club house or in the open air. Expected crowd size of 50-60 can be effectively sensitized on the lifecycle needs. The trainer should use some cases of their community to highlight the lifecycle needs of a person. For example, Mr. A had daughters marriage 2 years back. He borrowed heavily for the same and is paying off the debts even now. The trainer may comment that Mr. A has entered into a debt cycle and how it could have been avoided. However, the trainer should be extremely cautious of not hurting anyones sentiment & should be free from any communal bias. The main thrust of the beginners course shall be to sensitize the audience about the 8 lifecycle needs of a person. The delivery style should be least technical. However, the trainers has to introduce the Banks as a Safe, Reliable & Transparent organization. The trainer should make the session interactive & some humour must be there in the session. Evaluation Criteria: The below shall prove the success of the course: The participants could relate with the 8 requirements & challenges The participants were communicated the Banks positive image The participants had fun 5.3.2 Experts Course Objective: To make the audience aware about the 4 basic banking products, viz. Saving, Credit, Insurance & Remittance Methodology: A group of 15-20 persons should attend each session. The duration of each module shall be 1 hour. The trainer may use Posters, blackboard, multimedia to conduct the session. Ideally each session should start with a short story followed by the course & summed up by the role play. Now depending on time the role plays may not be conducted.

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Delivery: A session plan has to be done and in a phased manner the entire community may be covered. For example, say we have targeted a community with 100 persons & 2 trainers. The detailed training roster is given below: Day 1 Beginners Training Batch I (Comprising of 50 persons) Day 2 Beginners Training Batch II (Comprising of rest 50 persons) NB: The gap between Day 1 & Day 2 should be within 15 days. That is after 2 weeks all the 100 persons have completed the Beginners course. Now 4 groups shall be formed viz. A, B, C &D each comprising of 25 persons. Say, Trainer 1 shall be assigned Group A & B and Trainer 2 shall be assigned Group C & D. Day 3 Saving Facility Group A Day 4 Credit Facility Group A Day 5 Insurance Facility Group A Day 6 Remittance Facility Group A NB: Trainer 1 shall also conduct the same session for Group B also, preferably on the same module within 2-3 days of the session for Group A. The entire sessions for 4 groups should be completed within 30 days. Evaluation Criteria: entire community has: The course shall be considered successful if at the end of 45 days the

Basic idea about the lifecycle needs (viz. the 8 problems) The usual problems of local money lenders The idea that banks can be the friend in need in each of such lifecycle needs The willingness of people to visit the nearest Financial Literacy and Credit Counseling Centre (FLCC) to know more

5.4 Notes to Trainers

The purpose of the Beginners & Experts Course are to make people aware about the ABC of finance The language in the module is quite lucid and has to adopted as per particular regions No reference to any particular bank scheme can be done. There are two reasons: o The purpose of the two courses is to make them financially aware. That is it is imperative to teach them say, the power of compounding or saving than explaining various saving schemes of Banks o If any particular bank scheme is mentioned then some vested interest may creep in and the trainer in lieu of commission may promote the schemes. Thus, the whole purpose of this endeavor shall get diluted and probably lost After the participants are financially literate, that is they have some idea about saving, credit, insurance & remittance they can better grasp the advice of FLCC representatives or BCs or BFs The trainers shall also be knowing little or nothing about the various bank schemes. It is perfectly fine, as they are required to make the people aware about the lifecycle needs & banking facilities. In fact that is the precise reason that Non BC / BF is preferred Usually a trainer having good visibility in the community & relatively better enlightened than the rest has to be selected. The lead banks shall select the trainers 31

6. A model of spreading financial literacy

6.1 The Model

Fig: 19

The model for promoting financial literacy 32

6.2 Some Essential Points

Financial Literacy is an integral part of financial inclusion. Thus, the existing vehicles for financial inclusion shall have to be judiciously leveraged Financial Literacy in essence is similar to Literacy Mission of India, thus the Government should pursue it in a mission mode Banks have their core competency in providing banking services. They cannot have dedicated resources for spreading financial literacy. They shall play the roles of an enabler & facilitator in the financial literacy mission of India The Banks, thus have to identify agents for spreading financial literacy & train them The various stakeholders at National, State level may also choose such agents We have identified 4 such agents, viz. NGOs, SHGs, India Post employees & Mobile Retailers & Distributors The Lead Bank shall have to, however, establish a separate cell to monitor their activities & regulate them

6.3 Funding & Incentive

The activities of the 4 agents identified have to be financed by someone. The pivotal role in this regard shall be the National & State Development funds. However, in an eclectic manner NABARD & RBI can contribute in some specific schemes. Financial Inclusion and Financial Inclusion Technology Funds may also be used. At the state level the SLBC shall be responsible for proper disbursal & utilization of the fund. The Lead Banks, however, have to bear the marginal cost of training the agents. This is in line with the Lead Bank Scheme. However, at the discretion of SLBC & State Government some funding on an ad hoc basic can be made. Each of the 4 agents shall be provided some incentive. The details are given in the subsequent subsections.

6.4 Demystifying the model

OECD (INFE) & Asian Central Banks OECD is carrying out worldwide activities on financial education since 2003 and in particular the development of related international standards, the establishment of the International Network on Financial Education (INFE), and some forthcoming projects such as the inclusion of Financial Literacy Assessment in the next OECD Programme for International Student Assessment (PISA) for 2012. Thus, OECD shall be able to guide the policy makers of India in promulgating the right kind of policies & procedures. Also several tried & tested best practices adopted by other countries can be tailor made under the aegis of OECD to suit India. A yearly congregation of Asian central banks under the aegis of the OECD International Network on Financial Education (INFE) to discuss financial education and inclusion issues can prove quite helpful. 33

 Minisry of education, corporate affairs & finance, State Government, RBI, IBA, NABARD India is a vast country with a billion population spanned over 28 states & 7 union territories. No two regions are same & the socio-political-economical context of India is one of the most complex. Financial literacy program to suceed need active cooperation from National & State government. In essence educations leads a person towards freedom by empowering them. Financial literacy mission is also the same. It plans to equip the vulnerable section of the society with basic financial knowledge thereby empowering them. Thus, ministry of education can provide support & guidance in this regard, like the national literacy mission. The ministry of corporate affairs shall sensitize the various companies about the financial literacy mission. Unless the India Inc. takes active interest the financial literacy mission shall meet with partial success. It is to be noted how successful HULs Project Shakti has been. ITCs e-Choupal is also another excellent example. We may also also leverage such existing channels for the financial literacy mission. Ministry of finance shall oversee the financial aspect & ensure proper alignment of this literacy drive with the Union Budget. India Post shall help immensely through their vast network of postal offices & staff. RBI, NABARD & IBA shall play the role of integrator. They shall ensure that all the agents of financial literacy mission are on the same page. SLBC The SLBC (State Level Bankers Committee) plays a very important role in development at state level. SLBC convenor banks / lead banks are focusing on the urgent need for achieving 100% financial inclusion through penetration of banking services in the rural areas. Financial literacy being the vehicle of financial inclusion logically should be the responsibility of SLBC convenor banks / lead banks. At the state level the SLBC shall be responsible for proper disbursal & utilization of the funds required to promote financial literacy. Lead Banks The Lead Banks have their core competency in providing banking services. They cannot have dedicated resources for spreading financial literacy. They shall play the roles of an enabler & facilitator. The Lead Banks, however, have to either identify and train or train already identified agents for spreading financial literacy. They have to establish a separate cell to monitor their activities & regulate them.

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 Banks As the ultimate result of the people becoming financially literate is the development of the locality the benefit shall pass on to the local PSU & Private banks as well. Thus, their active co-operation is solicited. Agents spreding financial literacy They are the agents who work at the grass root level. They work at the municipal, block & village level. It is preferable if they are from the same locality. Thus, we have identified the below 4 agents. The agents shall be paid some commission for doing this work. However, as financial literacy is a part of financial inclusion none of the agents is required for full time. However, the regulation of the agents & disbursing of the incentive to them shall be taken up by SLBC/Lead Banks. NGO In India there are several NGOs doing an excellent work for empowering rural & urban poor. They have presence all over India & most importantly they enjoy the support of the localites. Thus, NGOs should be roped in to promote financial literacy. SHG Like NGOs India has several successful SHGs. Mostly run by the womenfolk these SHGs have improved the economic lot of many. Unlike the NGOs the SHGs are our target population i.e. the vulnerable section of society. Now each SHG member has some little exposure to banking facilities. We can ride on this & provide training to them. In turn the SHG members can educate their community memebers. The best part is this the SHG members shall educate their family and/or community members in a informal context. Post Office With 155,000 post offices, 139,173 of which are located in rural areas, India Post has the potential to reach the financially excluded population, many of whom are farmers. Indias 33,800 rural banking branches are mostly concentrated in selected pockets, covering no more than 5.2 per cent of its 600,000 villages. India Post, on the other hand, is represented in all villages and is often the only provider offering savings accounts specially to those on low incomes. During the past two years, the Post has opened 35 million savings accounts with no capital requirements for unbanked people. The government also uses postal branches for the distribution of currency in rural areas, where 85 per cent of transactions are still made in cash. Postmasters in rural post offices come from the same village and know everyone in the community. Thus, they can play a critical role in spreading financial literacy.

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 Mobile Connection Retailers & Distributors Mobile teledensity standing at a strong 60 per cent, the market possesses great potential for a collaboration that combines the strengths of both banking and telecom sectors. As an illustration, Airtel's 150 million strong customer base and ecosystem of over 1.5 million retailers and distributors across India can prove to be very vital for the promotion of financial literacy. In January State Bank of India, the country's largest bank and telecom giant Bharti Airtel entered into a joint venture (JV) to make available banking services to the country's unbanked population. The JV as Business Correspondent will engage Airtel's retailers as customer service points (CSP) all over the country in a phased manner. With this, existing and new Airtel mobile customers will be able to visit these outlets and open new SBI bank accounts and avail of other banking products and services available at CSPs. Additionally, existing SBI customers will also get serviced at these outlets. The government may think in this line as the recent trend shows exponential growth in new mobile connection. The government may choose certain mobile service providers having strong pan India presence. National Level Coordinating Agency Such a body shall be responsible for co-ordinating the financial literacy mission. The agency shall have presence in North-South-East-West Zone. This agency shall operate like the Unique Identification Authority of India. Financial Stability and Development Council may also play this role as the purpose of it is to institutionalize the mechanism for maintaining financial stability. This councils brief includes focus on financial inclusion as also literacy. 360 Degree feedback Several persons and/or agencies may have some path breaking idea. The government may consider such ideas from non conventional channel(s). Promotion, Media Campaign The various authorities at different levels have to identify the effective promotional technique to popularise the financial literacy mission.

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7. Sample models and/or success stories

(Source: http://inclusion.in/index.php?option=com_content&view=article&id=136)

Corporation Bank has successfully implemented Branchless Banking in Chittoor district of Andhra Pradesh. The key to making this a success is linking banking with livelihood. In a joint project with National Dairy Development Board (NDDB), it has launched Milk Mitra cards in Chittoor district. Under this, women milk producers are given loans to enter dairy farming, the milk is supplied to NDDB and all payments are made directly to the bank account of each woman. These accounts can be accessed at the village level itself through the business correspondent, also a member of the local community. It has been seen over time that branchless banking and better livelihood opportunities have inculcated the habit of saving in the villages. Its clearly a win-win situation for both the bank and the people! One of the villagers is appointed as business correspondent and he or she is given the branchless banking kit and cash to dispense basic banking services to the villagers. The kit is a handheld device with multiple connectivity options. The operations are carried out through radio frequency identification cards provided to business correspondents and the villagers. So, the model not only provides banking services to the villagers, it also opens an employment opportunity.

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(Source: http://inclusion.in/index.php?option=com_content&view=article&id=211)

Punjab National Bank has taken some initiative in introducing Banking facilities in Tineri Village, situated about 65 km from Patna. Panchayati Raj Institutions have been involved in Tineri as business facilitators. The Pradan led a padyatra through the village accompanied by drum beating to inform people about the new banking facilities. The facilitation role played by the panchayats in creating an enabling environment for the bank so as to link the financially excluded people with the bank, organising the un-organised sector of the population by developing SHGs and assessing the genuine credit requirements of the entire panchayat for having income generating activities, has been a unique aspect of this project. This holds lessons for others as in any state, the panchayat is the key village level institution. Under the project, each family in the village is provided with a biometric card, a thermal filter and a Near Field Communication (NFC) mobile handset at a total cost of only Rs 110, at least half of which is expected to come from the state government as subsidy. In return each customer is allowed to open a savings bank account even with zero balance in the branchless banking system. All transaction can thus be made with the biometric card and the NFC. Two things have been done in Bihar. First, linking the people with the bank through the financial inclusion programme. Second, a tie-up which enables funding all the e-Seva Kendras through village level entrepreneurs.

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8. Field Visits
Visit I
Village: Tehsil/Mandal: District: State/UT: Village 1 Kalyan Thane Maharashtra

Purpose of the Visit: 1) To understand the process of opening of No Frill accounts with simplified KYC norms 2) To understand the implementation and efficacy of the BC model 3) To understand the level of involvement and financial literacy of the villagers concerned and problems faced thereof

Learnings: UID card processing had been completed for the whole village; however physical cards had not arrived for many of them. If they had, then more accounts could have been opened To the Bank's credit, they had taken initiative in bringing camera so that even people without photos could open accounts without delay. Also, the importance and convenience which these accounts would bring was conveyed to each account holder On the one end of the spectrum there were people who distrusted and were not willing to accept that bank would not charge the for doorstep banking services and on the other end were some who considered this a part of Government sponsored welfare program and demanded that some amount be credited to their account immediately Financial literacy is a pre-requisite for ensuring continuity of these No frill accounts. A few individuals, especially the younger generation were simply proud to be finally having a bank account in their own name. Human factors especially those involving rural aspirations must be taken into consideration The banks generally involve the local school teachers & principal in educating the local people on various banking services However, banks conduct such financial camp very infrequently & learning reinforcement is poor The overall economic condition of village 1 is relatively better than the average rural India. But still the status of awareness about banking services is not so good. Further, this village is located near the city. This clearly shows that the intensity of financial literacy promotion has to be increased

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Visit II
Village: Tehsil/Mandal: District: State/UT: Village 2 Alibag Raigad Maharashtra

Purpose of Visit: To gain hands on knowledge about status of implementation of financial inclusion To gain familiarity with the progress of financial literacy by interacting with the BC To interact with the households & observe the level of financial awareness To interact with the Lead District Manager (LDM) or Lead Bank's officer To get an unbiased view about the financial behaviour of households

Learnings: Village 2 is relatively far from the city & is served by a single BC for the past 2 years and no significant financial literacy awareness campaigns have been conducted The BC is well known in the locality & the villagers in an informal manner consult him before taking any financial decision The villagers, however, aware of the basic financial concepts. But they are reluctant towards the formal banking channel & rely on informal sources, viz. Money Lenders, Family, Friends, Temple fund etc The lead bank conducts some awareness campaign but generally once a year. They are running a Rural Self Employment Training Institute (RSETI). The institute provides some vocational training to the villagers in the neighboring villages The rigor of promotion of the financial literacy should be increased. The BCs should be trained at periodic intervals of time. The banks should also have financial camps organized every six months

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9. Road Map for Financial Literacy & Awareness

As per the model in Page 36 the financial literacy campaign has to be implemented. India being a challenging terrain it would be better to do the same in a phase wise manner. Based on a consensus at a national level, zones should be identified & financial literacy dissemination should be started. The steps are given below:

Prarambh

Finalisation of a common financial literacy course (The modules mentioned in this paper can also be considered). The modules have to be sensitized keeping in mind the diversity of Indian population Proper coordination among Central & State government along with RBI, NABARD, IBA The national level coordinating agency shall be in control of the implementation of the financial literacy campaign

Jagaran

The lead bank along with the SLBC committe for the identified state has to arrange for training of the financial agents, viz NGO, SHG, Post Office employees & mobile connection retailers Proper care has to be taken that learning reinforcements are there from time to time & appraisal of the agents are being done The incentives for each agent should be promptly paid & the lead bank has to involve other banks in the state The India Inc must be made aware of the potential profitability that may arise once the vulnerable society becomes finacially literate

Mukti

The financial agents have to conduct awareness campaigns in the allotted block, village & municipality The duration, nature & other particulars of the campaign has to be finalized based on the local sensibilities The sole aim of the campaigns should be to bring the maximum unbanked population under the ambit of formal banking services Livelihood has to be linked with the bank accounts & lead bank should arrange for financial camps in the villages on a regular basis Instead of chasing numbers the government & regulators should ensure the proper implementation of this program in one particular block, village or municipal area before rushing to the next

Fig: 20

Road Map for financial literacy & awareness

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10. Conclusion

Financial literacy has been rightly recognized as an important adjunct for promoting Financial Inclusion & ultimately the financial stability. In the context of Financial Inclusion, the scope of Financial literacy is relatively broader & it acquires greater significance, as an important factor in the very access of the excluded group to financial services. Financial Literacy aims at bringing financial independence & prosperity in the life of low income group by helping them to manage their personal finances efficiently. It helps them to follow a financial strategy which enables them to build capital & assets & eventually come out of debt trap. This ultimately leads to enhancement of their income, recognition & empowerment.

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11. List of Figures

Fig: 1 Fig: 2 Fig: 3 Fig: 4 Fig: 5 Fig: 6 Fig: 7 Fig: 8 Fig: 9 Fig: 10 Fig: 11 Fig: 12 Fig: 13 Fig: 14 Fig: 15 Fig: 16 Fig: 17 Fig: 18 Fig: 19 Fig: 20 Life Line Financial Needs Simple perspective of Saving Bank Saving in simple terms Bank Credit in simple terms Improvement of Financial Status Difference after coming to a bank Insurance as an umbrella Choose the right umbrella Benefit of Insurance Bank Vs Moneylender Bank at your doorstep Business Correspondent Model Remittance Model in simple manner The world is a small place to live Your problems from all directions (Samasya Aato disha se) Your solutions from all directions (Samadhan Aato disha se) Vicious cycle of poverty Sample Trainers' materials The model for promoting financial literacy Road Map for financial literacy & awareness

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12. References
http://www.rbi.org.in o Referred circulars drafted by Rural Planning & Credit Department (RPCD) on financial literacy, BC model etc o http://www.rbi.org.in/financialeducation/home.aspx Deals with promotion of financial education http://www.sewa.org o SEWA is a trade union registered in 1972. It is an organisation of poor, selfemployed women workers. These are women who earn a living through their own labour or small businesses. They do not obtain regular salaried employment with welfare benefits like workers in the organised sector. They are the unprotected labour force of our country, India o Over the years they have developed some good financial literacy material http://www.oecd.org o The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world o They have done some pioneering work in financial literacy promotion http://www.grameen-info.org o Grameen Bank (GB) has reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability, participation and creativity. GB provides credit to the poorest of the poor in rural Bangladesh, without any collateral http://www.skoch.in o Skoch Consultancy Services is a boutique strategy and management consulting firm. Over the years they have doing some great work towards attaining inclusive growth http://www.financial-education.org o IGFE - International Gateway for Financial Education o The Gateway serves as global clearinghouse on financial education, providing access to a comprehensive range of information, data, resources, research and news on financial education issues and programmes around the globe o The Gateway was developed as part of the OECD Project on Financial Education http://www.moneysmart.gov.au o Website promoting financial education in Australia

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 http://www.navachetana.in o Navachetana Foundation is a registered non-profit organization working to promote financially sustainable social enterprises that generate long-term livelihood improvements for India's marginalized citizens http://www.flame.org.in/ o Financial Literacy Agenda for Mass Empowerment (FLAME) is an initiative by IIFL (India Infoline Limited) to light the flame of financial literacy across India. FLAME intends to empower the masses through education, which will eventually help them grow financially http://www.inclusion.in o A web magazine having articles on financial inclusion http://www.indg.in/financial-literacy o A website promoted by Department of Information Technology (DIT) on issues like agriculture, health, primary education, social welfare, rural energy, e-governance o They also have collection of articles on financial literacy http://fino.co.in/ o Financial Information Network & Operations Ltd (FINO) founded in year 2006, headquartered in Mumbai, India, has emerged as a leading inventor, innovator and implementer of integrated technology solutions for institutions like Banks, Microfinance Institutions, Government entities, Insurance companies to enable financial inclusion environment for the micro customers o They have some ad hoc initiatives in promoting financial literacy http://www.birdindia.org.in o Bankers Institute of Rural Development has some programs on financial literacy http://www.nabard.org/ o National Bank for Agriculture & Rural Development http://www.iba.org.in/ o Indian Banks Association Websites of some PSU & private banks o Many leading PSU & private banks are having deposit & credit schemes for the vulnerable section of the society

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