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In a forward-thinking step to enhance financial literacy among children at a young age, the Reserve Bank of India (RBI) declared that children aged 10 and above may now open and operate their own savings and term deposit accounts on their own. This move, announced in formal terms on April 21, 2025, is a major overhaul of India’s banking culture, promoting early financial education and prudence.
Empowering Financial Responsibility from an Early Age
According to the new RBI guidelines, banks can now allow children who are 10 years and older to have their own accounts, subject to the consent of the respective bank and with due specifications under its internal risk management policy. This reform allows children to understand saving, online banking, and money management overall from an early point in life.
More Flexibility for Younger Children
While this new instruction is empowering older minors, the RBI has also maintained the current provision where guardians, such as parents or legal guardians, can open accounts on behalf of minors of any age. Importantly, the RBI reaffirmed in a circular that mothers can be regarded as legal guardians, having since 1976 maintained this position. This preserves ongoing flexibility for families and guardians to take care of finances for younger children.
Transition Rules Upon Turning 18
After the minor account holder reaches the age of 18, banks need to take fresh operating instructions and new specimen signatures. If there was a guardian operating the account earlier, the bank has to facilitate a seamless transition by cross-checking account balances and helping the person take full control over their account as an adult.
Access to Modern Banking Services
The new rules also permit banks to provide modern banking facilities to eligible minors. Minors can be provided with access to:
- ATM/debit cards
- Internet banking
- Cheque books
But banks have to ensure that these services are in accordance with strict risk and security guidelines and are customized to suit the requirements of a young account holder.
Strict Guidelines: No Overdrafts Allowed
One of the key safeguards in the RBI’s circular is the prohibition of overdrafts on minor accounts. Whether operated independently by the minor or by a guardian, these accounts must always maintain a credit balance. This clause ensures financial safety and discourages misuse.
KYC Compliance Is Mandatory
Banks need to carry out complete Know Your Customer (KYC) processes while opening small accounts. This involves valid identification, verification of address, and regular due diligence to ensure account integrity and RBI compliance.
Implementation Timeline for Banks
In order to ensure widespread adoption, the RBI has directed all commercial and cooperative banks to update or modify their policies according to the new guidelines by July 1, 2025.
CONCLUSION
One Step Towards Financial Inclusion
This innovative step by the RBI encourages financial inclusion and paves the way for early financial awareness among India’s youth. By providing minors more control and agency over their money, it not only informs but also empowers the younger generation to make savvy money choices. With robust protection mechanisms in place, this initiative is a double win for both young customers as well as the banking ecosystem.