Financial Literacy
The philosophy of next level reforms in the financial sector is committed to financial inclusion. According to the Report of the Committee on Financial Sector Reforms, there are three main reasons for second generation financial sector reforms: fostering growth, including larger population of the country into the growth process, and building resilience to protect the economy against any kind of turbulence.
Inclusive growth in economy can be achieved if a large section of the population participates in the financial markets. For this to happen, it is necessary for them to know, understand, and develop the ability to evaluate, assess, transact in the financial markets. Inclusion is a laudable public policy objective, particularly in the financial sector. Financial literacy is one of the strategic initiatives to achieve inclusive growth.
In this context, participation of masses in financial markets is important and significant for the economic growth. For facilitating this process, it is important to initiate a national movement of financial literacy with the participation of a large number of stakeholders in the financial markets.
In India, though the saving rate is high, barely two percent of these savings goes into financial markets that are considered to be more efficient allocator of societal resources and savings. Incidence of investors investing a portion of their savings in equity is marginal compared to traditional investments like banks, insurance and others. Innumerable debates have been held and a plethora of suggestions have been made to include a large section of the population as beneficiary of the reform process in financial and real sectors. These deliberations have been based on the reform agenda: ‘financial inclusion’. One of the fundamental requirements for successful financial inclusion is financial literacy.
Technology has revolutionized the availability of information and information processing capacity. It is the faster movement of information and the speed in information processing that provides more transparency and facilitates faster execution of trading decisions.
As financial markets are in the process of development in India, exchanges have major roles to play in enhancing the knowledge of the financial markets amongst the different stakeholders. Exchanges have an excellent track record of creating awareness and educating the public as also the stakeholders. Exchanges invest in reaching a large number of people to make them informed and empowered. This, in turn, makes the exchanges more vibrant. Being major players in the financial markets, exchanges understand the markets and the different products that are traded in the markets, better than other intermediaries. This also makes exchanges more appropriate players in the market to cater the requirement of financial literacy amongst the masses.
The development of domain-specific knowledge on products and services is important to increase the participation and liquidity on exchanges. The exchanges already devote a great deal of funds, energy and resources in research and development. It is thus vital that exchanges play a leading role as a knowledge provider and contribute to financial literacy movement. All major global exchanges have their own dedicated Education and Training divisions to meet their in-house and industry needs. They are a major resource base in development of human resources for the industry and the stakeholders.
FTKMC, a knowledge initiative of the Financial Technologies Group has initiated various financial literacy programmes on its Knowledge for Markets platform. These include one-year Diploma in Financial Markets Practice, jointly with Indira Gandhi National Open University (IGNOU); International Winter School in Financial Markets Practice, jointly with National Institute of Industrial Engineering (NITIE); Global Financial Markets Exposure Programme; National Simulation Lab, a simulated market environment to understand and appreciate the trading in markets in various asset classes; Money Plant, a programme on Doordarshan; various certification programmes, including MCCP; short-term training programmes; tie-ups with a large number of institutions of repute; Farmers Awareness Programmes along with the Forward Markets Commission (FMC), the commodities market regulator; Markets in Motion, the weekly newsletter; periodicals; reviews; insights; and other publications.