RBI Revises Guidelines on Minor Bank Accounts to Foster Early Financial Literacy

In a significant move to encourage early-age financial literacy and independence among children, the Reserve Bank of India (RBI) has introduced revised guidelines for banks concerning the opening and operation of deposit accounts by minors. These new directives are aimed at harmonising existing rules, bringing greater clarity, and strengthening safeguards for young account holders.

According to the updated norms, banks may now allow minors of any age to open and operate savings or term deposit accounts through their natural or legal guardian. This provision includes the option for the account to be opened with the mother acting as guardian, in line with RBI’s earlier circular dated December 29, 1976.

A key highlight of the revised instructions is that minors aged 10 years and above can independently open and manage their savings or term deposit accounts, provided they meet certain conditions laid out by individual banks. These conditions, governed by each bank’s internal risk management policy, will define limits on transactions and services and must be clearly communicated to the minor account holder.

Upon reaching the age of majority (18 years), banks are required to obtain fresh operating instructions and updated specimen signatures from the account holders. For accounts previously operated by guardians, the bank must also confirm the balance and notify the account holder about these procedural requirements well in advance.

To promote digital banking habits and accessibility, banks have the discretion to extend additional facilities such as Internet banking, ATM/debit cards, and cheque books to minor account holders. However, such services will be offered only after assessing product suitability and customer appropriateness in line with each bank’s risk policies.

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Importantly, the RBI has mandated that all minor accounts—whether operated independently or by a guardian—must always maintain a positive balance. Overdrafts will not be permitted under any circumstances.

Banks are also instructed to conduct comprehensive customer due diligence during account opening and continue with ongoing verification processes, as prescribed under the Master Direction on Know Your Customer (KYC), 2016.

The RBI's latest move is expected to empower children with money management skills from an early age while ensuring necessary oversight and protections are in place.