In a major change in its guidelines for opening and operating bank accounts and other banking services by minors, the Reserve Bank has allowed minors to perform certain banking activities independently, without their guardians.
Banks already allow the opening of bank accounts in the names of minors with mothers as guardians. In 1976, the account opening rule was amended, given the considerable difficulty women customers used to experience while opening bank accounts in the names of minors. The RBI then asked banks to allow minors to have accounts with their mother as a guardian.
Continuing this practice, the RBI circular reiterates that 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 their mother as guardian, the circular said.
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What has changed now in terms of account opening norms for minors?
Now, children 10 years or above will be able to open and operate a savings account and a fixed deposit account on their own, as per the terms and conditions of the bank.
“Minors above such an age limit, not less than 10 years and up to such an 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,” the RBI circular said.
Remember, an account can be opened for a child of any age, but it will be operated through their guardian (parent or legal guardian).
Children 10 years or above, if they want and fulfill the conditions of the bank, will be able to open and operate the account on their own – that is, they will be able to deposit, withdraw money, and do other transactions.
While opening the account, the bank will tell all the terms and conditions to the customer in advance, so that there is no confusion.
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Necessary process as soon as the minor turns 18
When a minor account holder turns 18, the bank will have to take their new signature and fresh operating instructions. If the account was previously being run by his guardian, then the balance in the account will also be confirmed. The bank will prepare the customer for this process in advance so that the work can be completed on time.
Which bank facilities will be available for minors?
According to the new rules, banks can now also provide facilities like ATM/Debit Card, Check Book and Internet Banking to minors, but this will be based on the risk policy of the bank, understanding of the customer and the need.
“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 circular said.
Overdraft facility not to be allowed for minor accountholders
The RBI has, however, made it clear that overdraft will never be allowed in children’s accounts; that is, the account should always be in balance, the facility of borrowing will not be available.
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KYC is also necessary
Before and after opening the account, from time to time, the bank will have to take ‘Know Your Customer’ (KYC) i.e. all the documents related to the customer’s identity, so that any kind of fraud can be avoided.
New policies will be made by July 1, 2025
The RBI has asked banks to change their existing policies according to the new rules by July 1, 2025, and until then the old policies will continue.
This step is considered a big change in the direction of increasing financial literacy among children. Now children will not only learn to save money, but will also know how to use it responsibly.