Financial sector regulators advocated increased transparency and a consumer-centric approach to promote the culture of financial planning in India, and held that consumer protection is vital for the financial stability of the economy in the long-term.
"A financial product should suit the socio-economical and educational qualification of a customer, so that he should get optimum benefit of his investment," said BN Srikrishna, chairman of Financial Sector Legislative Reforms Commission (FSLRC), while addressing Financial Planning Congress' 11 organised by Financial Planning Standards Board of India.
"India has the highest saving rate in the world which was around 19% in 1997-98 and is currently around 33%. While the saving in India is considerably high, the allocation of these saving is a cause of concern as major portion of their investment is in banks deposits," he said.
He argued for increasing investment in other options such as equities, mutual fund and bonds.
"As per the RBI report only 1.4% of the household's savings are in equities, mutual funds, bonds and debentures which grew to 4% in 2005-06 and it is still very significant. We need to convert India from a country of savers to a country of investors," he said.
Speaking at the function, Reserve Bank of India deputy governor Anand Sinha said: "Consumer protection is not only important to attract more people into the fold of financial system, but also vital for maintaining the financial stability of the economy."
He said that there should be appropriate changes in the legislation to empower the RBI to take appropriate measures."Issues relating to management of banking institutions, secrecy of consumer information and duty structure among others should be addressed in the legislative process," he said.
Speakers in the event also emphasised on the importance of financial literacy for protection of investors' interest.
"Financial literacy is another area on which regulators and financial institutions should work upon," said Yogesh Agarwal, chairman, Pension Fund Regulatory and Development Authority. He also said as a regulator, PFRDA is working on various schemes to channel long-term funds into pension with awareness creation about these products.
Full transparency is the key to win customer's trust, according to the speakers. "Financial transparency and full disclosure should be made while selling the financial products and services," said D Swarup, chairman, FPSB India. He said that national level efforts to promote financial awareness, common set of rule specifically for consumer protection, non- conflicting incentive structure and adequate grievance redressal are necessary to promote the culture of financial planning in India.