RBI allows minors above 10 years to open savings & FD accounts independently; new rules to take effect on July 1

Bank Account Rules for Minors Above 10 Years Old: In a significant announcement, the RBI on Monday allowed commercial banks to permit minors above the age of 10 years to both open and operate savings and fixed deposit (FD) accounts independently. The new rules will kick in from July 1, according to an official communication. The move is set to boost financial literacy and promote long-term investments among the country’s outh. The central bank issued a set of revised guidelines for minors operating their own bank accounts independently in the country. 

Here are key takeaways from the development: 

Bank account rules for minors above 10 years old 

• Banks will be required to ensure complete Know Your Customer (KYC) formalities at the time of opening the account in favour of a minor, and even afterwards. They will also need to ensure timely KYC updates at regular intervals, as directed under the RBI’s KYC norms. 

• The new rules will enable a minor of any age to be able to set up and operate a savings or term deposit (fixed deposit) account, with the help of their parents or legal guardians. 

• As per the existing rules, even minors with single parents can exercise their right to open such accounts in this manner. 

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• In accordance with the bank’s terms and conditions, minors aged 10 years and above can open and operate their bank accounts independently. 
• However, commercial banks—like State Bank of India and HDFC Bank—will decide on the proposal on the basis of their risk management policies. The banks will be required to explain the terms and conditions clearly to the child. 
• Once the minor turns 18, the bank will have to take a new signature and issue fresh instructions to the operator. In case the account is operated by the guardian until then, the lender will have to verify the balance at this stage.

RBI regulations for minor bank account holders | Banking facilities for minors in India   

• The banks may decide to provide additional facilities such as internet banking, ATM/debit cards and cheque books, depending on factors such as risk management policy and the customer profile. 
• Such accounts will not be allowed to run into negative balance, regardless of who is operating the account. In other words, an overdraft facility will not be permitted in such accounts.

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What will happen before and after July 1?

• The RBI has directed commercial lenders to change their existing policies to adapt to the new rules by July 1, when the new rules are set to come into force. Until then, the existing rules will continue.