of MGNREGS * Female to ascertain the differential impact. The results show that access to finance increases by 4.1 percentage points in districts where MGNREGS is introduced early. To understand its economic significance, we look at a change in the average proportion of females from 0.49 (as in case of Rajasthan, the lowest in the sample) to 0.66 (as in case of Uttarakhand, the highest in the sample). The estimates in column 2 indicate that such a change leads to an additional 140 percentage point increase in the probability of access to bank account, quite a significant jump. In case of use, the magnitudes are a tad higher.
Before we conclude, it would be worthwhile to mention two sets of studies which have a bearing on the G2P initiative. The first set of studies explore the relevance of public works program for financial inclusion in the presence of gender-related violence. To provide some examples, Amaral et al. (2016) show that Indian districts which implemented the MGNREGS program early witnessed an increase in domestic violence. Earlier to that, Chin (2012) had demonstrated that female labor force participation is associated with a reduction in domestic violence. More recently, Ghosh and Gunther (2018) showed that households in states with gender-related violence are less likely to own a bank account, notwithstanding the fact that districts in these states were early implementers of the public works program.
The second set of studies examines the interface between public works program and left-wing extremism (LWE) violence and its interplay with financial inclusion. Employing an OLS framework, Barooah (2008) finds that LWE-conflict violence across districts increases with poverty and declines with literacy. Dasgupta et al. (2017) find that the effect of LWE-violence is mitigated by the roll-out of a large public works program (MNREGS) in Maoist-affected states. Using survey data, Ghosh (2019) shows that MGNREGS leads to an improvement in financial inclusion, notwithstanding the deleterious effects of higher LWE-violence.
Our findings therefore suggest that public work programs do play a role in significantly influencing financial inclusion.
Financial Literacy and Customer Protection
Efforts at financial inclusion need to be strengthened on the demand side by ensuring significant investments in financial literacy. This assumes relevance if the poor are to make effective use of various initiatives towards fostering financial inclusion. This should include not only basic financial literacy, but also sector-focused financial literacy or, even for that matter, product-driven financial literacy so that the poor are not short-changed. Efforts to promote financial literacy need to start early and include both conventional (e.g. school curriculum, dedicated websites, self-help groups) and unconventional (e.g. time slots during high-impact TV programs, toll-free helpline) delivery channels. The funds set aside by various regulators for this purpose need to be seamlessly integrated as part of the overall agenda.
Grievance redressal for customer complaints in banks also need imaginative thinking. Despite repeated exhortations, banks often penalize customers for minor violations, whereas any deficiency in service on their part are often not addressed expeditiously. The challenges in decoding and understanding the fine print from the large volume of convoluted information leads to an unequal relationship where the principal (i.e. the depositor) is actually far less powerful than the agent (i.e. the bank). The significant volume of complaints received by banks in regard to basic areas such as deposit accounts and even failure on non-observance and non-adherence to defined practices is ample testimony in this regard. As of end-March 2017, a total of 119678 complaints were received at Banking Ombudsman Office, of which 68 % pertained to public sector banks. Across ownership, issues relating to ATM/Credit and Debit cards were the most common, accounting for 13% of the complaints in public banks and 7% in private banks. The problem is all the more imposing for less sophisticated rural consumers, who are often unaware as how best to quickly and efficiently obtain a fair and cost-efficient solution to their grievances (Box 4).
Box 4: Consumer protection and financial literacy: What does global evidence suggest?
In collaboration with FinCoNet, an international cooperation platform for supervisory agencies in the area of financial consumer protection, the World Bank in 2013 conducted a Global Survey on Consumer Protection and Financial Literacy for 114 economies. The Report was published in 2014. India was not included in the Survey.
The survey covered four main areas: (1) legal and regulatory framework, (2) institutional arrangements, (3) disclosure practices, and (4) financial education.
Regarding the legal and regulatory framework, five areas were addressed: whether a country has a general consumer protection (CP) law, whether the CP law has explicit reference to financial services, whether the country has separate financial consumer protection (FCP) law, whether CP regulations exist within the framework of financial sector legislation, and finally, whether there exists other FCP laws. While only 35% of the 114 countries had a separate FCP law, the overall evidence indicated that a basic legal framework for consumer protection was in place in most countries, although it might not be very pertinent in terms of its coverage of the issues relevant to financial services.
As many as 29 items were included under institutional arrangements (Table). The evidence indicated that in countries with broad consumer protection legislation in place, the agency responsible for implementing this legislation also had the responsibility for consumer protection in financial services.
The survey examined 28 facets of disclosure practices, including among others, general disclosure requirements at the account opening stage, regardless of account type, including: (1) plain language, (2) local language, (3) a standardized format for disclosure, and (4) disclosing recourse rights and processes. There were also questions on the annual rate or yield, the method of compounding, minimum balance requirements, fees and penalties, and early withdrawal penalties (for deposit services). For credit services, among the included categories were annual percentage rate, fees, and computation method regarding the average balance and interest. Overall, disclosure requirements at opening of loan and deposit accounts are focused on rates and fees, and to a lesser extent on the manner in which these rates and fees are computed.
As regards financial education, a major focus was to understand whether there existed any dedicated agency to implement/oversee financial education. More than half (55%) of the countries had an agency that had the responsibility to implement/oversee any aspect of financial education/literacy.
The findings suggest that although some form of consumer protection legislation is in place in most countries, it does not necessarily include provisions specific to the financial services industry. Vast differences can be detected for the different income groups. Second, enforcement powers of supervisors are often limited, especially in lower middle-income and low-income countries. Third, regulations on financial consumer protections are of recent origin, and several countries of all income groups are pursuing this area with great vigor.
Notes: Numbers in brackets under each head indicate the number of included sub-categories. Numbers in each column indicate the number of countries complying with at least 50% of the subcategories.
We classify the countries based on their income as per the World Bank methodology. The analysis provides several insights. First, as one moves from high- to low-income countries, the proportion of countries compliant with the various sub-categories declines. Second, while higher income countries have, on average, achieved a higher levels of consumer protection and financial literacy (measured in terms of coverage of all sub-categories), this does not necessarily imply a causal relationship. This calls for greater research in this area, particularly concerning which item is inducing higher levels of financial inclusion, in order to inform policymaking on financial inclusion.
Although there is a lot of discussion on financial literacy in India, evidence on the ground
