RBI lets 10-year-olds sign cheques, do net-banking
May 06 2014 , Mumbai
The Reserve Bank of India broke new ground on Tuesday, allowing minors above 10 years to open and operate savings bank accounts and recurring bank deposits and save in bank fixed deposits independently, without requiring a guardian, which was the practice till now.
Such minor bank account holders will be entitled to most of the facilities, including use of ATM, cheque book and internet banking.
The only thing they will not be allowed is an overdraft facility. Banks will have to ensure that minor accounts always remain in credit, the central bank said.
RK Bansal, executive director of IDBI Bank, called it a path-breaking step. “Existing norms allowed minors to open bank accounts through a guardian and operate them independently. The new norms have allowed them to open accounts independently,” he said.
Bansal said the KYC norms required to follow in banking would not be an issue, as children these days hold PAN cards or Aadhar cards. “Banks cannot provide an overdraft facility in a kid’s account as a minor cannot be held accountable for a loan,” he explained.
RBI said banks can decide, in their own discretion, as to what minimum documents will be required for opening of accounts by minors. “Banks can fix limits in terms of age and amounts up to which minors may be allowed to operate deposit accounts independently,” the central bank said.
The RBI notification on Tuesday said the move is aimed at promoting the objective of financial inclusion and to bring uniformity among banks in opening and operating minors’ accounts. “A savings/fixed/recurring bank deposit account can be opened by a minor of any age through his/her natural or legally appointed guardian. Minors above 10 years may be allowed to open and operate savings bank accounts independently, if they so desire,” RBI said.
An RBI notification dated 1976 allowed opening of minors’ accounts (fixed and savings deposit accounts) with mothers as guardians, subject to safeguards such that ensuring that the accounts are not allowed to be overdrawn and that these always remain in credit. In 1989, RBI extended this facility to recurring deposits with mothers as guardians. Most banks offer savings bank accounts for kids with their guardians indemnifying them.
RBI has also lifted the levy of any penalty for non-maintenance of minimum balance in inoperative accounts, but didn’t specify the norm if the situation involves active accounts.
In its first bimonthly monetary policy statement on April 1, RBI had said banks should not levy penalty for non-maintenance of minimum balance in ordinary savings bank accounts and inoperative accounts. Instead, they could curtail the services offered in such accounts until the balance is restored.
RK Saraf, deputy managing director and chief financial officer at State Bank of India (SBI), said the ratio of inoperative accounts to active accounts in the banking sector is very small and, therefore, there will not be any impact on banks. He said SBI had done away with the penalty for non-maintenance of minimum balance for inoperative as well as operative accounts a year ago.
Officials at some other banks said that the move would hurt profitability.
Foreign banks and private sector banks levy huge penalties for non-maintenance of minimum balance. Citibank levies a charge of Rs 500 if the monthly relationship value falls below its requirement of Rs 2 lakh.
Private banks such as ICICI Bank, HDFC Bank require customers to maintain an average monthly balance of Rs 10,000 for urban and Rs 5,000 for semi-urban locations, which, if missed, may invite charges ranging from Rs 250 to Rs 350.