RBI revises norms for financial literacy

The Reserve Bank of India (RBI) on Wednesday released new guidelines for financial literacy and credit counselling centres after a study showed most of the existing centres were “actually working as institutions of sponsor banks”.

RBI said a nationwide survey of 30 centres in 16 states showed informational material provided by these centres generally pertained to various products of sponsor banks.

“Even though 53 per cent of the FLCCs (financial literacy and credit counselling centres) are run by separate trusts/societies formed for the purpose, these are actually working as institutions of sponsor banks due to their dependence for funding and administrative support,” RBI said in a release. “Thus, FLCCs are not in a position to maintain arms-length distance from sponsor banks as envisaged in the model scheme.”

RBI found all such centres were located in urban and semi-urban areas and not in rural areas, where most of the financially excluded population resides.

Awareness of such centres is low, RBI said, adding they serve mostly walk-in clients and have very few outdoor campaigns.

RBI said lead banks of various districts of the country would be told to set up financial literacy centres in each lead district manager’s office.

The banks will be given a deadline to set up these centres. This is expected to add more than 630 centres across the country.

RBI said banks should consider setting up need-based financial literacy centres in more locations. The rural branches of all scheduled commercial banks will be expected to promote financial literacy, the central bank said.

To standardise the information disseminated via such centres, RBI is preparing uniform training and educational modules that would be distributed to all banks.

Banks can translate the material into different languages, with focus on explaining basic banking products such as savings-cum-overdraft account.

Financial centres would be expected to maintain full record of the people served. The onus of monitoring these centres would be on the banks and the state-level bankers’ committees concerned.

Within 20 days of the end of a quarter, the state-level bankers’ committees will have to submit a quarterly report on the functioning of these centres to RBI’s regional offices, the central bank said.