Banking Freedom for Kids Over 10 with RBI's New Rule

Banking freedom for kids over 10 is the new talk of the town. The Reserve Bank of India (RBI) has now allowed minors above 10 to operate bank accounts. Bank account for minors will now be a reality. However, that comes with various terms and conditions for mitigating any possible risks.

Minors Above 10 Years Allowed to Open Accounts on Their Own

RBI allows minors above 10 years to open bank accounts. The first important point to note is that while minors, regardless of their age, can open a savings or term deposit account under their natural or legal guardian, the minors need to be at least 10 years in age to be allowed to open and manage these accounts on their own, in case they wish to.

Here are some more points to note:

• The new rule applies to all commercial banks and cooperative banks. This includes primary (urban) cooperative banks, state cooperative banks, and district central cooperative banks.
• The updated rules were explained by the central bank this Monday.
• Banks now need to update their policies based on the new rules by July 2025, as per the guidelines of the RBI.
• There are separate rules defined for the minor with an account when s/he turns major (18).
• The account can be opened by any minor under a guardian, where the guardian can be the mother as well.

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The new rules are a consequence of a review of some older guidelines first issued years back. The updates are more simplified. RBI has combined the rules for opening and running deposit accounts for minors.

Also, banks now have the authority and flexibility to set further rules for these accounts. This will be based on their particular risk management policies. The banks can now set limits on the amount of money that can be kept in such minor accounts. They will also be deciding on the terms and conditions.

All the important information is to be shared with the young account holder as well.

What Happens When the Minor Turns 18?

There are specified guidelines for a minor account for the minor turning into an adult.

When s/he turns 18, the bank will have to collect fresh account operating instructions. Along with a new specimen signature. In case the account was till no operated by the minor's guardian, the bank will be responsible for confirming the account balance.

Banks, overall, require to act quick, remaining ahead of time, in informing the account holders the important details. This is to prevent any delays in updating account details after the minor account holder turns 18.

Other Significant Rules

Additional Banking Services by Banks

RBI has given freedom to banks to decide on offering more banking services to the minor account holders. The services may include internet banking, cheque books, and ATM or debit cards. The banks are to decide on which services should be given based on its own risk management policies. This is because the additional banking services offered should not prove risky and should be suitable for young users.

Overdraft-Related Rules

RBI has cleared its stance on the accounts of minors not allowed to going into overdraft. The accounts need to always have a positive balance. There will not be any loan or negative balance in such accounts, and this must be ensured by the banks.

KYC (Know Your Customer)

Banks also need to follow all KYC rules while operating accounts for minors. This involves carrying out proper checks when opening such account, and continuing account verification over time. These rules form part of the Master Direction on KYC, that was issued by the RBI in February 2016 and that's updated timely.

The banks need to be ready with their internal policies in line with the new RBI rules and guidelines by July 1, 2025.

Savings Bank Account for Children: Purpose

The main purpose of RBI's new guidelines regarding the opening of accounts by minors is to empower them to manage finances. Individuals need to have the basic financial knowledge and its practical functioning. And when that's instilled from an early age, they will have the advantage of knowing their financial rights from the very beginning and will be aware of their financial responsibilities too.

Early-age savings added with financial independence aim at empowering your child to become money-wise.

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