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India has miles to go on the financial literacy front, going by the latest findings of a Home Credit India survey. As many as 68 per cent of survey respondents did not know their CIBIL score, the survey revealed.
Interest amount on loans
All the more disappointing is that 76 per cent of borrowers do not know their interest amount on their loans. However, the good news is that 74 per cent of respondents are willing to take financial literacy lessons to manage their finances better.
Home Credit India, a local arm of the international consumer finance provider with operations in Europe and Asia, conducted this research across 7 cities to understand the levels of financial literacy among borrowers. Close to 1,000 respondents were interviewed in the survey.
These seven cities are: Delhi/NCR; Mumbai; Kolkata; Hyderabad; Patna; Bhopal and Jaipur.
About 50 per cent respondents were aware of mutual funds. Kolkata leads the research with 66 per cent of people aware of MF, followed by Delhi at 61 per cent and Mumbai at 53 per cent.
Patna reported lowest literacy levels with only 22 per cent of borrowers aware of their CIBIL score, followed by Kolkata at 25 per cent and Mumbai at 25 per cent.
The research revealed that 52 per cent of the borrowers understand what a CIBIL score is and its importance. CIBIL score is a parameter that helps in understanding the borrower’s eligibility for loans. Interestingly, this group has already taken a loan and are still not aware of the CIBIL score.
The research also revealed that 76 per cent of the borrowers did not know the interest amount on their loans. They are only interested to know the EMI amount to be budgeted monthly, but were found to be unaware of the interest amount separately. Only 17 per cent of borrowers in Delhi, 19 per cent in Jaipur and 24 per cent in Mumbai knew the interest amount on their loans.
The respondents were concerned and kept track of their EMI amount while the knowledge of the rate of interest charged and amount of interest was low.
Marko Carevic, Chief Marketing and Customer Experience Officer, Home Credit India, said; “Financial literacy is imperative for any country’s economic progress. This research on financial literacy is aimed to understand our customers’ know-how of their finances management better. The research revealed that a majority wants to understand their finances better and are keen to take financial literacy lessons. This help us draw a meaningful financial literacy program that will help our people build an understanding of the basics of personal finance like budgeting, good debt vs bad debt, when to borrow.”
Credit and debit card
Interestingly, only 44 per cent respondents understand the difference between credit and debit card. Given the frequent visits to the bank branch, by using passbooks, 87 per cent is aware of the meaning of savings account and 80 per cent understands the meaning of current account. The women interviewed in the research were found to have a lower understanding of finances when compared to men.
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