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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 is quite limited. The recent Financial Inclusion Insights (FII) survey of more than 45,000 respondents across 22 states in India provides some initial insights as to the status in this regard (Box 5).