The draft “National Strategy for Financial Education” seeks to create a “financially aware and empowered India” and convert savers into investors over five years
Mumbai: Financial sector regulators, including Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and the Insurance Regulatory And Development Authority (IRDA), on Monday proposed a nationwide survey for assessing financial inclusion and literacy in the country and educate 50 crore adults, besides providing financial education to school children, reports PTI.
The draft “National Strategy for Financial Education” seeks to create a “financially aware and empowered India” and convert savers into investors.
It pitches for a five-year action plan for financial literacy with initial focus on four sectors—banking, securities market, insurance and retirement planning.
The strategy, the draft said, is to undertake a massive financial education campaign to help people manage money more effectively to achieve financial well being by accessing appropriate financial products and services.
“In India, we need to convert savers into investors,” the draft, pared under the aegis of the sub-committee of the Financial Stability and Development Council (FSDC) and simultaneously released for comments by all financial sector regulators, said.
On more participation of domestic retail investors in the securities market, the draft said it will reduce dependence on foreign investors and domestic savers reaping benefits of corporate growth and reducing strain on government for investment in national infrastructure.
Acknowledging that increasing range and complexity of products has made it very difficult for an ordinary person to take an informed decision, the draft said financial literacy will help in protecting society and individuals against exploitative financial schemes and exorbitant interest rate charged by moneylenders.
Financial education will help to avoid over-indebtedness, improve quality of services and make wise financial decisions, the draft said.
On delivery channels for financial education, the draft policy said governments have recognised that it should start at school and that people should be educated about financial matters as early as possible in their lives.
“Our educational system should equip students with these necessary life skills, without which, education will be incomplete,” it said, adding the Central Board of Secondary Education (CBSE) has agreed, in principle, to introduce it in an integral manner in school education.
It said social marketing campaigns such as polio eradication, prevention of child marriage and female foeticide, can serve as models in financial education.
Pitching for using services of self-help groups and NGOs, the draft said mass media like TV, radio, print and internet should be exploited fully for financial education.
It further said there is a need of multi-lingual, toll-free helpline where an investor, customer and client can call and get friendly assistance.
“It (helpline) should be like a friend who is available to guide you in case of difficulties. All regulators can think of such initiative, if they have not already thought of it,” the draft proposed.
The document said the entire policy is sought to be implemented through existing institutional mechanism.
National Institute of Financial Education (NIFE) could be a specialised institute under National Institute of Securities Markets (NISM) reporting to the technical group for implementation of National Strategy for Financial Education.
The draft said as a very first step towards financial literacy, a nationwide sample survey through an outside agency like NCAER, should be carried out for assessing the state of financial inclusion and financial literacy.
The survey should cover the state of financial inclusion, awareness of financial products, financial competency and his/her attitude towards money and risk.
Click here to see the draft (http://www.sebi.gov.in/cms/sebi_data/attachdocs/1342416428845.pdf)
The committee is mandated to review existing policies and suggest necessary changes in the investment framework in the high-priority infrastructure sector
New Delhi: The union government appointed eminent banker Deepak Parekh as the new Chairman of the High Level Committee on Financing Infrastructure, reports PTI.
The committee was first set up in November 2010 under the chairmanship of Rakesh Mohan, former Deputy Governor of Reserve Bank of India.
The committee was mandated to review existing policies and suggest necessary changes in the investment framework in the high-priority infrastructure sector.
Parekh was appointed chairman of the committee earlier this month after approval from Prime Minister Manmohan Singh.
Parekh, who is the Chairman of housing finance major HDFC Ltd, would function in an honorary capacity with the rank of a minister of state.
Parekh is also a part of the sub-committee of the Prime Minister's council on Trade & Industry for promoting Financial Inclusion, besides being a member of the expert group on restructuring of Hindustan Aeronautics Ltd (HAL).
Parekh is known for his frank views on various policy issues and has often been drawn in for consultation during crisis situations including in Satyam and UTI cases.
While setting up the HLC on Financing Infrastructure, the government had said in November 2010 that it would have a tenure of 18 months.
The other members of this committee now include R Gopalan (Secretary, Department of Economic Affairs), DK Mittal (Secretary, Department of Financial Services), insurance regulator IRDA Chairman J Hari Narayan, PFRDA Chairman Yogesh Agarwal, RBI Deputy Governor Subir Gokarn, SBI Chairman Pratip Chaudhuri and LIC Chairman DK Mehrotra.
The other members include PFC Chairman Satnam Singh, ICICI Bank chief Chanda Kochhar, IDFC chief Rajiv Lall, as also Uday Kotak, GM Rao, GV Sanjay Reddy, Sonjoy Chatterjee and Madhav Dhar.
Gajendra Haldea, Advisor to Planning Commission Deputy Chairman, will be the member-convenor of the committee.
The special invitees to the committee include Railway Board Chairman Vinay Mittal, secretaries in power, road transport and highways, urban development, petroleum and natural gas, telecom and water resources ministries, SEBI Chairman UK Sinha, Finance Ministry's Chief Economic Advisor Kaushik Basu and the chief statistician TCA Anant.
Among other things, the committee would make recommendations relating to financing of the projected investment of Rs40,99,240 crore (over $1 trillion) during the 12th Five Year Plan period (2012-17).
SBI Life is seeking media support to publicise the one year old SBI Life Flexi Smart variable insurance plan. It seems to be a desperate attempt to entice those who put money in traditional products
The PR agency of SBI Life has just sent us an email to help readers understand the one year old SBI Life Flexi Smart product. This has left us bemused. Is the company desperate to cash-in on the growing trend of traditional products and position variable insurance plans (VIP) as some better option? Is it a rude joke on customers who are already becoming worse off by shoving hard earned money on traditional products? The product is called "Flexi Smart", but it is targeted for the naive investor. It would have been understandable if SBI Life was trying to promote the SBI Life Annuity Plus product which was launched few months ago with competitive annuity rates.
Over a year ago SBI Life launched a variable non-participating insurance plan, "Flexi Smart Insurance". This variable insurance plan (VIP) was a new identity (after revamping) given to the banned toxic universal life policy. VIP combines the worst of both-ULIPs and traditional plans. The charges are transparent like those of ULIPs. It is 27.5% in the first year; 7.5% in the second and third years and 5% thereafter. There will also be a risk premium on mortality charges based on the policyholder's age, to cover the sum assured-which is 10 to 20 times of annualised premium. The heading of the product brochure is "No pain, only gain". You should read it as "No gain, only pain".
It was astounding to read an article one year ago in a leading business newspaper The Economic Times, which tried to project VIP as best of ULIP and traditional plan. It was deplorable that the article quoted SBI Life Actuary saying that the product interest rate works like a bank account. Which bank you walk in today will take your Rs100 and give you deposit receipt of Rs72.50? It can only happen with a VIP product from an insurance company. Even LIC Bima Account I and II (also VIP) will not break-even in five years.
The investments are opaque like traditional plans and will be mostly in the debt market and hence, will fetch low returns. The SBI Life Flexi Smart plan provides a guaranteed annual interest rate of 2.5% which is absolutely pathetic. The carrot offered to lure the customers is 7.25% interim interest rate for 2012-13. The truth is that the interest rate is net of all the astronomical charges!
The product offers flexibility of a premium holiday option, facility of increasing or decreasing the sum assured as per the changing needs and an option to top up premium. The premium holiday option offers the flexibility of not paying the premium for one to three years after completion of five annualised premiums. Many ULIPs offer a limited premium payment term wherein the policy remains in force until the policy term, without the payment of premium. The flexibility of increasing the sum assured is not allowed after age 50; the cost of medical expenses is to be borne by the life assured and it will not be allowed if the policyholder has already exercised the option to decrease the sum assured.
Needless to say, the increase in sum assured will be accompanied by increase in risk premium (mortality charges). Neither the increase nor decrease in sum assured will reduce the premium amount. The death benefit will be the sum of the policy account balance and the sum assured. The maturity benefit will be the terminal interest rate along with the balance in the policy account.
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