RBI Governor D Subbarao today said India can achieve double-digit economic growth if millions of people, who are not covered by financial services, are brought under organised banking system which will raise the overall savings level, a must for 10 per cent or more expansion.
He said that providing complete financial services to nearly half the population, who have no access to them, could further raise household and overall savings, “fulfilling one of the necessary conditions to achieve double-digit growth we aspire to.”
To make this happen, “we need to deepen penetration and expand the coverage of financial services to all sections of society and to all regions of the country… particularly to those at the bottom of the economic pyramid,” Subbarao said at a workshop on financial literacy organised by RBI and the Organisation for Economic Cooperation and Development.
India had registered an economic growth of 6.7 per cent in FY’09 after posting over 9 per cent growth in the three preceding year, due to the global economic crisis.
He added that the absence of financial awareness and literacy is one of the main reasons behind lack of access to financial products or failure to use them even when they are available.
Quoting a study, he said around 60 per cent of labourers
surveyed in India indicated that they store cash at home,
while borrowing from money lenders at a high interest rates.
“Financial literacy and awareness are integral to ensuring financial inclusion,” he said.
This was not just about imparting financial knowledge and information, but also changing behaviour, he added.
“When consumers know of financial products available, when they are able to evaluate merits and demerits of each product, are able to negotiate what they want, they will feel empowered in a very meaningful way. They will know enough to demand accountability and seek redressal of greivances. This in turn will enhance the integrity and quality of financial markets”, said Subbarao.
Financial literacy and education should be developed hand in hand with improving access to financial services, he said.
Suggesting some points to be researched on, he said it was important to determine the impact and effectiveness of financial education programmes and to do survey and evaluation of grassroot experiments to draw up the best practicies.
There was need to study the link between financial literacy on the one hand and financial inclusion and improved financial outcomes on the other hand to understand which models have been effective, he said.
He also suggested studying sucessful experiments of NGOs like SEWA, which started financial counselling training services for poor self employed women and identify how these can be mainstreamed in a cost effective way.
A study on technology which could be leveraged to engage and empower people in financial literacy and for training were another areas to be explored, he said.