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‘Financial literacy is important to understand financial risks’

07-December-2009
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‘Financial literacy is important to understand financial risks’

‘Moneylife’ magazine in association with ‘Reliance Mutual Fund’ presented the ‘Reliance Mutual Fund-Moneylife Big Ideas Award’ on Saturday, December 5, 2009, in Mumbai. Apart from the ‘Big Ideas Essay Contest’, the prize distribution event was also held as part of the 100th issue celebrations of the fortnightly magazine.

Moneylife is said to have undertaken the initiative to identify outstanding talent through a high-profile essay contest among the 80-odd business schools in Mumbai and Pune.

The prize distribution ceremony was preceded by an address by Chief Guest Usha Thorat, Deputy Governor, Reserve Bank of India, followed by a panel discussion on the contest theme - ‘Taking Financial Markets to the Masses’. The panelists included Anil Khandelwal, Former Chairman, Bank of Baroda; Jagan Mohan Rao, Chief General Manager, Reserve Bank of India; Amitabh Mohanty, Head Fixed Income, Reliance Mutual Fund; Madhu Kannan, CEO, Bombay Stock Exchange, Shailesh Haribhakti, founder partner, BDO Haribhakti; and Usha Thorat.

Thorat highlighted the importance of taking financial markets to the masses for the growth of a robust economy. She also pointed out that financial illiteracy was not only in rural India, but also among the most literate of the country. Thorat also explained the initiatives or steps taken by the RBI to help spread the awareness of being financially literate and taking financial markets to the masses.

Thorat further said, “It is important for the population to be financial literate, especially when it comes to savings, it also comes to aid when it comes to education, being financial literate is of help even for self employed women or even young couples.”

“While financial literacy is empowering consumers, it is also needed for better understanding of financial risks and is required not only to empower consumers but it is also important to increase the financial penetration and see how financial products are taken to the masses,” she added.

The panel discussions saw the participation of not just the panelists, but also saw the well-informed audience comprising mainly students, who grilled the panelists with questions. It highlighted how technology, including the growth of Internet and mobile, can help take financial markets to the masses.

Khandelwal noted, “The national psyche is that there is financial illiteracy even among the literates in the country, but if these efforts by RBI continue, at least in the long run you may have stock exchange in rural India. However, today this scenario looks challenging nevertheless the key to the problem is financial literacy.”

Haribhakti observed, “The fastest growing field is the education sector, especially in the small and medium enterprise. I believe that within 10 years, convergence of technology will happen in such a rapid space for making sure of synergisation and, therefore, creating a new paradigm. The challenge, however, remains to create the right experience by segmenting the population willing to get this education.”

According to Kannan, “I believe, financial literacy is very relevant for the growth of the Indian economy and also making sure that the investor class in non metro is able to communicate significantly.”

Amitabh Mohanty, Head - Fixed Income, Reliance Mutual Fund, noted, “The idea is, however, to start early and smartly. The blossoming of technology is going to be a huge force multiplier and with the kind of Internet penetration, at least in the ABC towns, we can get financial literacy to the masses.”

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