Impact of Financial Literacy on Investment Behaviour of Individual Investors in India

Financial literacy is an important capability for making informed decisions about saving, borrowing, investing and managing financial risk. In India, the expansion of banking access, mutual fund distribution, online trading platforms and digital financial services has increased the range of investment choices available to households. At the same time, access to financial products does not necessarily mean that individuals understand their costs, risks, liquidity characteristics or suitability for particular goals. This paper examines the relationship between financial literacy and the investment behaviour of individual investors in India. It considers financial knowledge, financial attitudes and financial behaviour, and discusses how these dimensions may shape preferences for bank deposits, equity shares, mutual funds, government securities, gold, insurance and pension products. The paper adopts a descriptive and analytical approach based on secondary sources, including peer-reviewed studies and publications from Indian and international institutions. Existing evidence suggests that financial literacy is associated with improved financial planning and more informed financial behaviour, although the relationship is also shaped by income, education, access to financial services, risk tolerance and behavioural biases. The paper concludes that financial education should combine conceptual knowledge with practical decision-making skills, investor protection awareness and accessible guidance. Since this paper is based on secondary material, it does not claim original survey findings or statistical tests. The hypotheses and empirical framework presented can guide a future primary study.