Children above 10 years can now operate their bank accounts
What's the story
In a major move, the Reserve Bank of India (RBI) has issued new guidelines, permitting children aged 10 years and above to open and operate bank accounts independently.
The rule is applicable to all commercial and cooperative banks in the country.
The RBI has empowered banks to frame rules for these accounts according to their own risk management policies.
Limit
Cap on account balance
For children, banks can put a cap on the amount of money that can be maintained in such accounts and determine the terms and conditions. However, these terms should be clearly communicated to the young account holder.
Transition
Process for account updates when minor turns 18
When a minor becomes an adult upon turning 18, the bank must offer new account operating instructions and collect a fresh specimen signature.
If the account was being operated by a guardian, the bank must also verify the account balance.
The RBI has directed banks to prepare in advance and inform account holders well in advance to avoid delays in updating account details after the children turn 18.
Services
RBI's guidelines on additional banking services
Banks are also allowed to provide more banking services to minor account holders, including internet banking, debit cards, and checkbooks.
However, these services can only be offered after the bank reviews its risk management policies, and confirms that the products are appropriate for young users.
The RBI has clarified that accounts of minors should not be allowed to go into overdraft.
KYC
KYC rules for opening accounts of minors
Banks must follow all Know Your Customer (KYC) rules while opening accounts for minors. This includes conducting thorough checks while opening the account and verifying the account over time. All banks must align their internal policies with these latest RBI guidelines by July 1.