NEW DELHI: Not many of us have had the opportunity to begin operating savings bank accounts when we were kids, but the RBI’s policy tweaks over the past few years have allowed even minors younger than 10 years of age to hold and operate a saving account.
Starting 2014, the Reserve Bank of India (RBI) allowed banks to offer savings accounts to minors and several banks now offer differentiated accounts for younger customers. For instance, both State Bank of India (SBI) and ICICI Bank offer two different kinds of accounts for minors: one for children between 10 years and 18 years, and another for those younger than 10 years of age.
The account scheme for those below 10 years of age is jointly operated by a parent or guardian while the one for older children allows them to operate it independently. However, once they reach 18 years of age, the account will go dormant and will have to be converted into a normal savings account.
Other such schemes for minors are provided by banks including those like HDFC Bank’s Kids Advantage, Kotak Mahindra Bank’s My Junior and Axis Bank’s Future Stars. Most of these accounts offer a full range of banking services including internet banking, debit cards, ATM usage, cheque books and a passbook.
"Such accounts can be an invaluable learning tool for children under proper supervision from parents. Teaching them to save in an actual bank account teaches a lot more than just hoarding cash in a piggy bank," notes financial planner Kishore Kumar, adding "Bank accounts that minors can operate gives them exposure to interest rates, penalties, etc, that every adult needs to be aware of."
Experts warn that supervision is a key aspect of imparting such learnings. For instance, parents or guardians are advised to pick savings bank schemes that have a very low minimum balance and restrictions on the amount that can be withdrawn through ATM/Debit cards.
It is also imperative that parents supervise the ATM transactions of their children periodically to ensure they aren’t used too often or to withdraw substantial amounts. Most banks make sure minor account come with withdrawal restrictions.