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Early age savings and financial independence empower your child to become money-wise. RBI has issued fresh guidelines for banks regarding the opening and operation of deposit accounts by minors. The revised guidelines are aimed at harmonising existing regulations to ensure greater clarity and appropriate safeguards for minor account holders.
Based on the review by RBI, the revised instructions on opening and operation in the deposit accounts of minors are given below:
- Minors of any age may be allowed to open and operate savings and term deposit accounts through his/ her natural or legal guardian. They may also be allowed to open such accounts with mother as guardian in terms of RBI’s Circular DBOD.Leg.BC.158/C.90(H)-76 dated December 29, 1976.
- Minors above such an age limit not less than 10 years and up to such amount and such terms as may be fixed by the banks keeping in view their risk management policy, may be allowed to open and operate savings/ term deposit accounts independently, if they so desire, and such terms shall be duly conveyed to the account holder.
- On attaining the age of majority, fresh operating instructions and specimen signature of the account holder shall be obtained and kept on record. Moreover, if the account is operated by the guardian, the balance shall be got confirmed. The banks shall take advance action, including communicating these requirements to minor account holders attaining the age of majority, to ensure fulfilment of these requirements.
- The banks are free to offer additional banking facilities like internet banking, ATM/ debit cards, cheque book facility, etc., to the minor account holders basis their risk management policy, product suitability and customer appropriateness.
- The banks shall ensure that accounts of minors, whether operated independently or through a guardian, are not allowed to be overdrawn and that these always remain in credit balance.
- The banks shall perform customer due diligence for opening of deposit accounts of minors and undertake ongoing due diligence, as per the provisions of Master Direction on Know Your Customer (KYC) Direction, 2016 dated February 25, 2016, as amended from time to time.
According to RBI instructions, minors of any age can open and operate savings and term deposit accounts through their natural or legal guardian. In line with previous RBI guidance, these accounts may also be opened with the mother as the guardian.
Minors who are 10 years or older are permitted to open and independently operate savings or term deposit accounts, subject to the limits and conditions set by individual banks, in accordance with their internal risk management policies. RBI mandates that the terms of such accounts should be communicated clearly to the account holder. This provision empowers financially literate minors to manage their own funds, while still allowing banks to exercise necessary oversight.
When a minor reaches the age of majority, banks will require new operating instructions and a specimen signature from the account holder. In cases where the account was previously operated by a guardian, the bank will verify the account balance. To facilitate this transition, banks will proactively inform young account holders about these important updates well in advance.
Banks have the option to offer additional banking services, such as internet banking, ATM/debit cards, and cheque books, to minor account holders. However, these services will be provided only after assessing the bank’s risk management policy, the suitability of the product, and the appropriateness for the customer.
To encourage responsible financial habits and minimize risk, minor accounts whether operated independently or by a guardian, will not be allowed to have an overdraft facility. It is essential for these accounts to maintain a positive balance at all times.
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