Impact of Financial Literacy on Financial Inclusion and the Initiatives by Canara Bank Towards Spreading Financial Literacy

Topics: Bank, Financial services, Finance Pages: 15 (5217 words) Published: October 2, 2011
Financial inclusion has recently become the buzzword among the policymakers and bankers and in academic research. It is considered as an integral part of the efforts to promote inclusive economic growth. Financial inclusion has been the utmost priority for the government of India as well as the Reserve Bank of India. One of the executive at a prominent Public Sector Bank says, Financial Inclusion is a social obligation for the government, and social obligation, mandatory obligation as well as Business opportunity for the banks and financial institutions. Financial inclusion represents the access to safe, easy and affordable financial services for poor, vulnerable groups, disadvantaged areas for accelerated growth and for reducing income disparities and poverty. Financial literacy is a prerequisite for effective financial inclusion, which will ensure that financial services “reach the unreached and under-reached sections of the society,” There are various reasons why people are unbanked and one of the important reason being ignorance to the major banking services and unawareness about the banking products and also unawareness about which product suits them the best It is not just imparting knowledge and information, but it plays an important role in changing the behavior with an ultimate goal to empower consumers to make informed and confident financial decisions. In the context of 'financial inclusion', the scope of financial education is relatively broader and it acquires greater significance since it could be an important factor in the very access of such excluded groups to finance. In countries with diverse social and economic profile like India, financial education is particularly relevant for people who are resource poor and who operate at the margin and are vulnerable to persistent downward financial pressures. Financial education can help them prepare ahead of time for life cycle needs and deal with unexpected emergencies without assuming unnecessary debt. In this paper, I am making an attempt to bring out the impact of financial literacy on financial inclusion. The study is based on both the primary and secondary data. The primary data regarding the financial inclusion activities of Canara Bank has been collected by interviewing the officers at Canara Bank and this study has drawn data from various other sources also. Keywords:

Financial inclusion, financial literacy, banking services, opportunities etc.,

Impact of financial literacy on financial inclusion and financial literacy initiatives by the Canara Bank Introduction:
Financial education can be comprehensively defined as “the process by which Consumers / investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help and to take other effective actions to improve their financial well-being”. Financial education thus goes beyond the provision of financial information and advice. The focus of any discussion on financial education is primarily on the individual, who usually has limited resources and skills to appreciate the complexities of financial dealings with financial intermediaries on matters relating to personal finance on a day to day basis. Financial literacy can also be broadly defined as providing the familiarity with and understanding of financial market products, especially rewards and risks, in order to make informed choices. Viewed from this point, financial literacy primarily relates to personal financial literacy to enable the individuals to take effective actions to improve overall well being and avoid distress in matters that are financial.

Financial literacy becomes very important and indispensable for better financial behaviour and discipline. To be effective, financial literacy needs to inform...
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