Finance Minister Pranab Mukherjee today said financial understanding has assumed greater importance in the wake of the global crisis, which was triggered by complex products that people invested in without realising the risks.
"Today financial competence has become more essential as financial markets offer more complex choices," Mukherjee said at a workshop on financial literacy.
The workshop was jointly organised by the Reserve Bank of India (RBI) and the Organisation for Economic Cooperation and Development (OECD).
"In fact, the recent global financial crisis has raised the question whether lack of financial knowledge led individuals to take out adjustable rate mortgages or incur credit card debts they could not afford," Mukherjee said.
While policies are in place that enables access to many financial services, he said, "the responsibility for saving and investing for the future primarily lies with the individual."
The Finance Minister said research shows that there is a strong link between one's knowledge of economics and the financial decisions related to savings, borrowings, retirement planning or portfolio choice that one makes.
Policy initiatives seeking to provide greater access to financial services to a large segment of the population would require filling the existing knowledge gap in financial education, he said.
Over the last decade or so, researchers across the world, mainly in the developed countries have started to study and explore whether individuals are well equipped to make financial decisions, he said.
"OECD report on financial literacy in the year 2005 has documented low levels of financial literacy in several countries," Mukherjee added.
