The growing significance of financial literacy in India – Gaps and opportunities

While the personal finance segment has grown exponentially in the last few years; there is still a need for increased financial literacy to make the sector more streamlined for consumers. As per a recent report by SEBI, only 27% of the country’s population is financially literate. This highlights the need for increased financial literacy across the country, especially in Tier 2/ 3 cities and beyond.

Covid has been a testimony to the importance of building a thought-through financial corpus. People have faced financial crunches, due to sudden job losses, salary cuts; businesses across the globe faced unprecedented challenges. The good side of the coin is, people realised the importance of savings and investments to tackle any exigency. Consumers realised how prudent money management could help them secure their future and keep them away from the rainy days.

Given the rapid pace of digitalization across the globe and the advent of fintech companies, several digital solutions have been helping consumers with financial literacy and saving plans. Multiple personal finance apps have come up, which can track and categorize one’s expenses and investments, help save in a disciplinary manner, and check and improve the credit score. Some apps even help consumers identify unwanted subscriptions so that consumers can cancel them and focus on savings. Many of these apps come with investment guiding tools and methods. Such apps provide a great way of guiding consumers with investment options and can be considered as a key tool for consumers’ financial literacy. However, consumers should always be alert to the credibility, usage and security of the apps and then opt for them. 

With the remote and virtual communication structure today, many companies and entrepreneurs are offering financial literacy virtually. Many institutions are providing courses that are customised for Indian consumers; the courses are well-researched and objective. Such courses are further bifurcated for entrepreneurs, MSME owners and women. Virtual courses have also been highly effective in the penetration of financial literacy in smaller cities.

Post-Covid, there has been a huge growth in seminars and conferences offering financial literacy. Right from banks to financial platforms, personal finance companies, individual financial experts have initiated such virtual events to help consumers understand investment tools and build a corpus as per their financial needs. Attending such conferences can boost confidence in young professionals, women take more informed financial decisions.

Another significant aspect of personal finance, which should never be forgotten is investing in a balanced insurance portfolio. Consumers need to understand that insurance will not only help in protecting their future and families, but it will create a protection cushion for securing the financial corpus that is being built. Traditional insurance companies and the new age digital insurance companies are working assertively in educating consumers about the importance of insurance and multiple insurance products.  Many digital insurance companies are helping consumers choose the right insurance products through their tech-based platform; guided by an insurance advisor network. Such platforms and models have proved to be significant in improving the insurance literacy rate in the country.

While personal finance has been gaining significance in the last few years; there is still a huge gap in the financial literacy rate. Consumers in smaller towns and cities are comparatively more vulnerable when it comes to the understanding of finance and growing wealth. Thus, the public, as well as, the private sector need to join hands together for increasing financial literacy in the country. Digital should be used more and more to reach out to consumers and bridge the financial literacy gap in the country.

by, Indraneel Chatterjee, Co-Founder, RenewBuy