RBI Allows Kids Above 10 to Open and Manage Bank Accounts in India
What Are the New Rules?
On April 21, 2025, the Reserve Bank of India (RBI) introduced a groundbreaking policy that allows children aged 10 and above to independently open and operate savings and term deposit bank accounts. This significant change, effective immediately, aims to promote financial inclusion, encourage financial literacy, and empower young individuals to take their first steps toward managing money responsibly. Below, we explain the new rules in simple terms, breaking down what they mean for kids, parents, and banks, and why this change matters for India’s future.
What Are the New Rules?
The RBI’s updated guidelines allow minors aged 10 and older to open and manage their own bank accounts without requiring a parent or guardian to oversee transactions. These accounts include:
Savings Bank Accounts: Accounts where you can deposit money, earn interest, and withdraw funds as needed. Think of it as a piggy bank at a bank that grows over time.
Term Deposit Accounts: Fixed deposits where you lock in money for a set period (e.g., 1 or 2 years) to earn higher interest. It’s like saving for a big goal, like a new bicycle.
However, banks have the flexibility to set their own rules to keep these accounts safe. This includes:
Deposit Limits: Banks can decide the maximum amount a child can keep in their account, ensuring they don’t handle large sums that could be risky.
Terms and Conditions: Banks can outline specific guidelines, such as how often withdrawals are allowed or what services (like debit cards) are offered. These rules must be clearly explained to the young account holder in a way they can understand.
For example, a bank might limit a child’s savings account to ₹50,000 and allow only a few withdrawals per month to encourage saving. These terms vary by bank, so parents should check with their bank for details.
Who Can Open an Account?
The new policy applies to two groups of minors:
Minors Aged 10 and Above: Children in this age group can open and operate savings or term deposit accounts independently, as long as they meet the bank’s requirements. They can deposit pocket money, birthday cash, or other small amounts and learn to manage their funds.
Minors Below 10: Younger children can still have bank accounts, but these must be opened and managed by a guardian. A guardian can be a parent or a legally appointed person, and the RBI has reaffirmed that mothers can act as guardians, as per a 1976 circular. This ensures flexibility for families, especially in cases where the father is unavailable.
Why Is This Change Important?
The RBI’s decision is a big step toward building a financially literate and inclusive society. Here’s why it matters:
Teaching Financial Responsibility: By managing their own accounts, kids learn to save, budget, and make smart money choices. For instance, a 12-year-old saving for a new gadget learns the value of patience and planning.
Promoting Financial Inclusion: This policy ensures that young people, even those from modest backgrounds, can access banking services early, making them part of India’s financial system.
Empowering the Next Generation: Early exposure to banking helps kids develop habits that will benefit them as adults, like understanding interest or avoiding overspending.
The RBI’s move aligns with its broader goal of making banking accessible to all, as highlighted in its April 21, 2025, circular: “Minors above such an age limit not less than 10 years… may be allowed to open and operate savings/term deposit accounts independently, if they so desire”.
What Happens When a Child Turns 18?
When a minor account holder reaches the age of 18, they become an adult in the eyes of the law, and their account needs to be updated. Banks are required to:
Collect New Instructions: The young adult must provide fresh account operating instructions, such as how they want to manage the account (e.g., online banking or in-person).
Update Signatures: A new specimen signature is needed to reflect their adult status.
Verify Balances: If the account was previously managed by a guardian, the bank must confirm the account balance to ensure accuracy during the transition.
To avoid disruptions, banks are encouraged to notify account holders and guardians well in advance—sometimes months before the child turns 18. This proactive approach ensures a smooth shift to independent account management.
Compliance and Deadlines
The new guidelines took effect on April 21, 2025, and banks are expected to fully comply by July 1, 2025. During this period, banks must:
Implement Monitoring Systems: Ensure minor accounts are safe, with no overdrafts (borrowing money) allowed, keeping accounts in credit balance.
Conduct Due Diligence: Verify the identity of account holders and guardians, following Know Your Customer (KYC) norms, such as requiring an Aadhaar card or birth certificate.
Communicate Clearly: Explain account terms to young account holders in simple language, ensuring they understand their responsibilities.
Banks are also free to offer additional services, like mobile banking apps or financial education programs, to make the experience engaging for kids.
Benefits for Kids and Parents
This policy offers practical benefits for both children and their families:
For Kids:
Independence: Managing their own account gives kids a sense of ownership and pride.
Learning Opportunity: They learn real-world skills like saving for goals, understanding interest, and avoiding impulsive spending.
Safe Environment: Bank limits and oversight ensure kids can experiment with money management without major risks.
For Parents:
Educational Tool: Parents can use the account to teach kids about money, such as saving part of their pocket money or festival gifts.
Flexibility: For younger kids, parents (including mothers) can manage accounts, making it easier to save for their future.
Encouraging Good Habits: Early banking exposure helps kids develop lifelong financial discipline.
For example, a parent might help their 11-year-old open a savings account with ₹5,000 from birthday gifts, teaching them to check their balance online and save for a new toy. By the time the child is 18, they could have a small nest egg and a solid understanding of banking.
Key Terms Explained
Savings Bank Account: A bank account where you can deposit money, earn a small amount of interest, and withdraw funds when needed. It’s like a digital piggy bank.
Term Deposit Account: A fixed deposit where you deposit money for a set period (e.g., 1 year) and earn higher interest. You can’t withdraw the money until the period ends.
Guardian: A person legally responsible for a minor’s affairs, such as a parent or someone appointed by a court.
Risk Management Policy: Rules banks use to keep accounts safe, like setting limits on deposits or withdrawals to protect young account holders.
Know Your Customer (KYC): A process where banks verify your identity using documents like an Aadhaar card, passport, or birth certificate.
Overdraft: Borrowing money from a bank by withdrawing more than what’s in your account. Minor accounts are not allowed to have overdrafts.
Practical Steps for Parents
To take advantage of this new policy, parents can follow these steps:
Choose a Bank: Visit a bank that offers minor accounts, such as State Bank of India, HDFC Bank, or ICICI Bank, and ask about their specific rules for kids’ accounts.
Gather Documents: Bring KYC documents like the child’s Aadhaar card, birth certificate, or school ID, and your own ID if opening an account for a child under 10.
Understand Terms: Ask the bank about deposit limits, withdrawal rules, and any additional services (e.g., debit cards or mobile apps) available for kids.
Educate Your Child: Explain basic banking concepts, like how interest works or why saving is important, to make the experience meaningful.
Monitor Progress: For kids 10 and above, check in periodically to ensure they’re managing their account responsibly, offering guidance as needed.
Impact on Families and Society
This change affects families across India in meaningful ways:
Urban Families: Kids in cities can save pocket money or earnings from small tasks, learning to use digital banking tools safely.
Rural Families: The policy makes banking accessible to children in remote areas, where financial inclusion is often limited, helping bridge the urban-rural gap.
Low-Income Households: Families with modest means can open accounts for their kids with small deposits, fostering a savings culture early on.
The RBI’s initiative also has broader societal benefits. By encouraging financial literacy among young people, India can build a generation that’s better equipped to handle economic challenges, from saving for education to planning for retirement. As the RBI noted, this move is designed to “rationalize and harmonize” banking practices, ensuring consistency across banks.
Conclusion
The RBI’s decision to allow children aged 10 and above to open and manage their own bank accounts is a forward-thinking step toward a more financially inclusive and literate India. By giving kids the tools to save, budget, and understand banking, this policy lays the groundwork for a generation that’s confident in handling money. Parents are encouraged to explore this opportunity, working with banks to open accounts that suit their children’s needs. With a compliance deadline of July 1, 2025, now is the perfect time to start teaching kids the value of financial responsibility, one deposit at a time.