The RBI’s notification on Tuesday granting banks the liberty to allow minors above 10 years to independently open and operate savings bank accounts, without involving parents or guardians, has already raised a debate.
Banks have also been given the leeway to offer additional facilities like internet banking, ATM, debit card and chequebook to a minor i.e. below the age of 18.
While the move has been hailed as a revolutionary idea to encourage kids to start saving early, the opposing arguments are focussed on the fact that the products that banks currently have for teenagers have been linked to their guardians precisely because most of them could not sign on their own. Then there are issues of how banks would tackle a problem such as a bounced cheque or the misuse of an ATM card b y a minor.
There could be other barriers such as the identity requirements to open an individual account. The fineprint, therefore, will have to be worked out by banks and the RBI carefully. These are not arcane concerns. Bharatiya Mahila Bank, for instance, has had to work around problems of collateral to give credit to women.
The move by the RBI to open up banking for kids revives a long dormant policy. It was 38 years ago on December 29, 1976, to be precise when the RBI had issued its first advisory allowing minors to open fixed and savings deposit accounts with their mothers as guardians.
On the question of how young is too young to open a savings account, the global experience too reflects a progressive trend. While most countries still restrict youth under the age of 18 from independently opening a savings account, the Philippines is a notable exception, where children can open an account at age 7. The Metrobank, the second largest bank in the Philippines, has an exclusive savings account for kids and teens 7-18 years of age, which, the bank says, “offers a better way of teaching them the value of saving”. The Rizal Commercial Banking Corp, the Philippines’ fifth-largest bank by assets, offers what it calls a ‘W.I.S.E. savings account’ to children aged 7 – 14 years. Parents are able to monitor the bank accounts and have the ability to set ATM limits.
In the US, San Francisco-based Wells Fargo & Co offers teens from the ages 13 onwards a checking account, as long as a parent co-signs the account. The account comes with a Visa debit card and the parent has the ability to set daily limits on withdrawals and spending, along with online access and free online statements, with no monthly service charges.
Anil is a senior editor based in New Delhi.