Tag: Guardian Signature

In banking practice, a minor is a person who has not completed eighteen years of age. According to Indian law, a minor is not competent to enter into a contract, but banks are allowed to open and operate accounts in the name of minors under certain safeguards. The main objective is to encourage savings habits from an early age while protecting the bank from legal risk. Banks generally follow RBI guidelines and internal rules while dealing with minor accounts.

Opening of Minor’s Account

A minor’s account can be opened in two ways. First, in the name of the minor to be operated by a natural guardian such as father or mother. Second, in the minor’s own name if the minor is above a certain age, usually ten years, as permitted by bank policy. In both cases, proper account opening form must be filled, mentioning the minor’s name, date of birth, and guardian details where applicable.

Banks require proof of age of the minor such as birth certificate, school certificate, Aadhaar card, or passport. Identity and address proof of the guardian is also compulsory. Photographs of the minor and guardian are collected. The guardian must sign the account opening form and specimen signature card. The account is clearly marked as “Minor Account” to avoid misuse.

Role of Guardian

The guardian acts on behalf of the minor and operates the account responsibly. He can deposit money, withdraw funds, and give instructions to the bank. The guardian must use the funds only for the benefit of the minor such as education, health, or basic needs. Banks do not allow guardians to overdraw the account because a minor cannot legally be held responsible for debt. Therefore, no overdraft facility is permitted in minor accounts.

Only natural guardians are generally accepted, not friends or relatives, unless appointed by court order. Once the guardian is registered with the bank, no other person is allowed to operate the account without proper authority.

Types of Accounts for Minors

Banks usually allow minors to open savings accounts and fixed deposit accounts. Current accounts are not allowed because they involve business transactions and overdrafts. Savings accounts encourage regular saving habits and earn interest. Fixed deposits help in building long term financial security for the child.

Some banks also offer special children savings schemes with low minimum balance and educational benefits. However, all such accounts follow strict operational rules to avoid legal complications.

Operation of Account by Minor

If the minor is above a certain age (generally ten years), the bank may allow him or her to operate the account independently. This includes depositing money, withdrawing small amounts, and using ATM cards with limited balance. However, banks closely monitor such accounts and place transaction limits to prevent misuse.

Even when minors operate the account themselves, banks do not provide cheque books in many cases. If cheque facility is given, it is under strict control and low value limits.

No Credit Facilities

Banks do not grant loans, overdrafts, or credit cards to minors because contracts with minors are void under Indian law. Even if a guardian signs on behalf of the minor, the bank cannot legally recover the loan from the minor. Therefore, all minor accounts are maintained strictly on a deposit only basis.

However, banks may accept fixed deposits in the minor’s name and allow loans against such deposits only when the guardian accepts full responsibility.

Conversion After Attaining Majority

When the minor attains the age of eighteen, the account must be converted into a major account. The bank informs the customer to submit fresh KYC documents, photograph, and specimen signature. A new account opening form is filled as a major.

The guardian’s authority automatically ends once the minor becomes major. From that date, the account is operated solely by the customer. If any balance or fixed deposit exists, it continues in the name of the now major person without interruption.

Banks may freeze the account temporarily if the customer does not complete formalities after becoming major. This ensures legal compliance and protection.

Precautions Taken by Banks:

Banks take several precautions while dealing with minor accounts. They clearly mention the account title as “Minor through Guardian” or “Minor Self Account”. They do not allow negative balances. Withdrawal slips and cheque forms are carefully verified. Large transactions are monitored. Banks also ensure that the guardian does not misuse the minor’s funds.

Proper records of age proof and guardian authority are maintained. RBI guidelines are strictly followed to avoid legal risk.

Advantages of Minor Accounts:

Minor accounts help children learn financial discipline and saving habits. Parents can save for education and future expenses safely. Interest earned increases long term savings. It also promotes financial inclusion from an early age.

Legal Position

Under Indian Contract Act, minors cannot enter into contracts. However, opening a deposit account is considered beneficial to the minor and is legally permitted. Banks are allowed to accept deposits but not create liabilities in minor’s name. This is why all credit facilities are restricted.