Finance Is Psychology, Not Just Numbers

You moved from an MBA into a PhD in Finance and now teach at XLRI. Looking back, what moments or experiences first sparked your interest in behavioural and household finance?
The 2008 global financial crisis was a turning point for many of us studying finance. It became clear that traditional models
assuming rational behaviour couldn’t explain what we were witnessing. I was particularly struck by how ordinary households made financial decisions that deviated dramatically from textbook prescriptions. In India, this gap is even wider. Despite having access to formal banking and investment products, many families struggle with basic financial planning. What fascinated me was understanding why educated, capable individuals often make suboptimal financial choices. This isn’t about intelligence; it’s about psychology, context, and the real constraints people face. That curiosity led me to pursue doctoral research where I could systematically study these patterns.
That interest challenges many classical finance assumptions. How did behavioural finance change the way you personally think about financial decision-making?
Behavioural finance fundamentally changed my understanding by showing that so-called “irrational” behaviour is actually quite
predictable. We now know that people use mental shortcuts that evolved to help us make quick decisions, but these same shortcuts can lead us astray in complex financial situations. Consider loss aversion: people feel the pain of losing money roughly twice as intensely as they feel the pleasure of gaining it. This explains why investors hold on to losing stocks for too long, hoping to break even, or why they take excessive risks after a loss to “win it back.” These patterns repeat across cultures and income levels. What changed for me was realising that good financial education isn’t just about teaching concepts; it’s about helping people recognise and manage their own behavioural tendencies.

When these behavioural insights are applied to Indian households, where do you see the biggest gaps between theory and real- world financial behaviour?
Three gaps stand out. First, despite India’s financial literacy rate improving to around 27 per cent, according to recent estimates, we still see a massive awareness-action disconnect. People may understand that diversification is important, but they still keep most of their savings in low-yield fixed deposits or gold. Risk aversion plays a huge role here, but so does trust in traditional versus modern financial instruments. Second, we’re witnessing explosive growth in retail investment. More than 130 million unique investors now participate in securities markets, a near tripling since 2019. Yet many new investors, particularly younger ones, are susceptible to herd behaviour and speculation. A 2024 study found that over 68 per cent of cryptocurrency investment decisions were driven by FOMO (fear of missing out) rather than fundamental analysis. Third, financial fragility remains widespread. Recent surveys show that a significant portion of households struggle to meet unexpected expenses, indicating that savings behaviours haven’t kept pace with consumption patterns.

Given those gaps, what policy or institutional change do you believe could most meaningfully improve household financial outcomes in India?
I advocate for three interconnected changes. First, we need financial education that goes beyond information dissemination. The RBI’s Financial Inclusion Index has risen to 67 in 2025, up from 64 the previous year, showing progress on access. But access alone isn’t enough. Education programmes must address psychological barriers like overconfidence and present bias, not just explain compound interest. Second, we urgently need stronger consumer protection in the fintech space. India’s digital payments market is projected to reach $10 trillion by 2026, with UPI transactions alone crossing 130 billion annually. This explosive growth creates opportunities but also risks. Gamification features and social media influencers can exploit behavioural biases, particularly among first-time investors. We need regulatory frameworks that incorporate behavioural safeguards, cooling-off periods for high-risk products, and clearer risk disclosures. Third, we need to build financial resilience through structured programmes targeting vulnerable groups. Women, for instance, hold more than 55 per cent of Jan Dhan accounts but often lack the confidence and opportunity to make independent financial decisions despite having the knowledge.

Financial literacy is often proposed as the solution. From your research, which types of literacy interventions actually translate into sustained behavioural change, and which tend to fall short?
The interventions that work share common features: they are timely, practical, and account for psychological realities. Programmes that succeed are delivered when people are making actual financial decisions, like getting their first pay cheque, buying a home, or planning retirement. They provide concrete tools, not just concepts. For example, auto-enrolment in retirement savings leverages inertia for good; automatic transfers make saving effortless. What fails are generic awareness campaigns disconnected from people’s lived experiences. Telling someone about the importance of diversification doesn’t help if they lack surplus income to invest. Here’s the uncomfortable truth: financial knowledge alone has limited impact if it is not paired with the means and opportunity to act on it. A Kerala study from 2024 found that 84 per cent of respondents were moderately financially literate, yet significant gaps remained in actual financial behaviours like long-term planning and budgeting. Knowledge is necessary but insufficient. The best interventions combine education with behavioural nudges like default options, simplified choices, and commitment devices that help people follow through on their intentions.

Your work also highlights gender differences in financial behaviour. How should educators, employers, or product designers adapt their approaches in light of these findings?
Gender differences in financial behaviour are real but often misunderstood. The gaps are less about capability and more about confidence, opportunity, and socialisation. Women often exhibit greater caution in financial decisions, which can be prudent, but this can also stem from lower financial confidence even when knowledge levels are similar. Educators should focus on building financial self-efficacy through practical, hands-on learning. Role models matter enormously. When women see other women successfully managing investments or starting businesses, it normalises these behaviours. Employers can make a significant difference through targeted financial wellness programmes and workplace policies. Providing equal access to retirement planning, transparent compensation, and flexibility that doesn’t penalise career interruptions helps address the structural factors that create lifetime wealth gaps. Product designers should avoid stereotyping. The assumption that women are naturally risk-averse or that men prefer complex products isn’t just inaccurate, it’s harmful. Good design accommodates diverse decision-making styles without reinforcing gender stereotypes. Financial products should be clear, accessible, and flexible enough for anyone to use confidently.

As fintech platforms rapidly expand access to financial products, how do you evaluate their impact on consumer behaviour, especially for first-time or underserved users?
Fintech is a double-edged sword. On one side, it is genuinely transformative. India now accounts for 46 per cent of global
digital payment transactions, with UPI alone processing more than 13,000 crore transactions in FY 2024. For millions of
previously excluded Indians, fintech means their first bank account, their first investment, their first insurance policy. The
convenience and low costs are democratising finance in ways traditional banks never could. But there is a darker side. The same features that make fintech accessible can also exploit behavioural vulnerabilities. Retail investors now constitute more than 45 per cent of cash market turnover, up from 33 per cent just five years ago. Many are first- time investors with limited financial knowledge, making them susceptible to biases like herd mentality, overconfidence, and anchoring. The proliferation of financial influencers on YouTube and social media amplifies these risks. Recent analysis shows that many influencers disproportionately discuss momentum stocks and trending investments without adequate risk disclosure. For underserved users, the risk is even greater. The ease of getting credit through fintech can lead to over-borrowing. The excitement of trading can become addictive. We need fintech regulation that is as innovative as the industry itself, incorporating behavioural insights to protect consumers while preserving the genuine benefits of financial inclusion.

Bringing these realities into the classroom, how do you design finance courses at XLRI that balance analytical rigour with behavioural and contextual understanding?
I teach courses ranging from corporate finance to behavioural finance and portfolio management, and my approach integrates
three elements. First, analytical rigour remains foundational. Students must master valuation models, understand capital structure, and apply portfolio theory. These tools are powerful and necessary. Second, I layer in behavioural perspectives. When we study portfolio optimisation, we also examine why real portfolios look nothing like mean-variance efficient frontiers. Students analyse actual cases where behavioural biases led to poor outcomes, learning to spot these patterns in themselves and others.
Third, I emphasise Indian context. Concepts that work beautifully in developed markets often need adaptation here. For instance, students study how factors like family structure, caste, regional economics, and informal lending networks shape financial behaviour in ways that standard models miss. The pedagogy is deliberately research-oriented. Students work with real
data, conduct surveys, and use statistical software. They learn to question assumptions and test hypotheses. My goal is producing finance professionals who are technically skilled, behaviourally aware, and contextually grounded. They need to design products and policies that work for real people, not idealised rational actors.

Xplore, XLRI’s premier CXO club, aims to bridge academia, industry, and students through dialogue and shared learning. How can platforms like Xplore help students connect academic finance concepts with real-world decision-making and industry practice?
Platforms like Xplore serve a vital bridging function. Academic finance gives students powerful analytical tools, but applying these tools in messy, real-world situations requires wisdom that only comes from experience and dialogue. When CXOs share
how they actually make decisions — under time pressure, with incomplete information, and conflicting stakeholder interests —
students see the gap between textbook problems and real problems. They learn that “maximising shareholder value” sounds
clear in theory but involves difficult trade-offs in practice. This is valuable for students, but I think it is equally valuable for
industry. Practitioners benefit from exposure to current research and analytical frameworks that can sharpen their thinking. The best platforms create genuine reciprocal learning. Students should present their analytical work to industry leaders for critique.
Executives should bring real, unresolved problems for academic analysis. This back-and-forth creates insights neither side would
develop alone. For Xplore to maximise impact, I’d emphasise the quality of dialogue over the quantity of events. Deep conversations on focused topics, where both academics and practitioners come prepared to challenge and learn from each other, generate more value than surface-level networking.

Finally, for students aspiring to work at the intersection of finance, technology, and social impact, what guidance would you offer as they prepare for their careers?
Four pieces of guidance. First, develop dual competencies. The future of finance is deeply technical, requiring strong quantitative skills, programming ability, and comfort with data. But equally important is understanding human behaviour, psychology, and social systems. The students who will thrive are those who can build sophisticated models and understand why real people might not behave according to those models. Second, cultivate healthy scepticism toward technological solutionism. Technology is a powerful tool, but it is not a panacea. India’s fintech adoption rate of 87 per cent is impressive, but we’re also seeing new forms of financial vulnerability emerge. Innovation that genuinely creates social impact must address psychological, social, and structural barriers, not just technological ones. Third, commit to equity and inclusion. India’s financial inclusion story has bright spots, such as 560 million Jan Dhan accounts, but huge gaps remain. Financial literacy is 40 per cent in urban areas versus 27 per cent in rural areas. The middle class is growing, but millions remain excluded or vulnerable. Creating real social impact means designing solutions for the hardest-to-reach populations, not just the most profitable segments. Finally, embrace intellectual humility. Finance and human behaviour are complex. Our understanding remains incomplete, and unexpected interactions constantly surprise us. The best career advice? Stay curious, keep learning, and be willing to revise your views based on evidence. The finance-technology-impact intersection rewards those who combine analytical rigour with empathy and adaptability.