Credit education in India has been a bit of a step child as far as general financial literacy in the country is concerned. Unfortunately, this gap has not yet been filled satisfactorily by either public or private enterprises. We have insurance education and investor education, but the rather vital aspect of credit education has been somewhat neglected for many years.

There have been several attempts to redress the situation but with mixed results at best. In 2007, the Reserve Bank of India had recommended that banks set-up Financial Literacy and Counselling Centres (FLCC) either individually or with pooled resources, to disseminate information and educate people on credit. The goal was to make individuals aware of their rights and responsibilities as borrowers, gain exposure to the advantages of joining the formal credit sector, be advised on the various products & services available on the market, and receive counselling on debt restructuring in case of distress.

Following this recommendation, a few banks did attempt to set-up credit counselling centers for retail borrowers. However, these initial efforts proved to be woefully insufficient in terms of geographic reach and in terms of connecting effectively with urban and rural segments of the population.

Bank of India’s ABHAY, ICICI Bank’s DISHA and Bank of Baroda’s SARATHEE were some of the early birds who set-up credit education centres without exactly getting the credit education worm. All of them were started with great expectations but fell significantly short of the objective of successful credit literacy outreach. Over time, they became largely reduced to being platforms to get delinquent customers to make a settlement or to close a written-off account. There is a need to provide genuine, comprehensive credit education that helps customers take informed credit decisions.

There is a need to provide genuine, comprehensive credit education that helps customers take informed credit decisions

Mean while, in the absence of a robust credit education framework, several private consumer awareness forums and complaint redressal sites mushroomed, offering a platform for disgruntled borrowers to air their (often ill-informed) complaints. Recognizing the widespread lack of credit awareness, several private players started offering a sketchy kind of credit education, including advice on borrowing, handling credit & repayment, and reading credit reports. However, many of them were, and continue to be, initiatives based largely on internal compulsions like Search Engine and Key word attraction rather than a genuine intent to educate borrowers on all aspects of credit.

The good news is that the situation is changing – and it is happening quickly. Both the government and private players are recognizing that the lack of credit awareness is a critical and largely unaddressed issue in India’s dynamic financial sector. The country’s increasingly sophisticated and inclusive financial landscape driven by the Jan Dhan Yojana and other digital initiatives is creating a huge and urgent demand for genuine, comprehensive credit education that reaches all segments of society. The multiple opportunities in terms of scope and scale in the credit education space today are driving innovative, technology-driven solutions in this hitherto-overlooked area. It is certainly exciting times ahead for credit in India.