RBI’s New Rules for Savings Accounts for Kids: A Big Push Towards Early Financial Empowerment

The Reserve Bank of India (RBI) has taken a significant step towards financial empowerment of minors by issuing a fresh set of guidelines on the opening and operation of deposit accounts by children. The updated norms, aimed at simplifying and harmonising the existing regulations, bring clarity, structure, and a child-centric focus to banking for minors.

In an age where children are growing up with smartphones, digital wallets, and instant payments, the new RBI norms attempt to match the pace of this evolution—offering freedom, but with safety nets.

What Has Changed? A Quick Overview

Before diving into the details, here’s a snapshot of what the RBI has revised in April 2025:

• Minors can open and operate accounts at any age through a guardian.
• Children aged 10 and above can independently operate their accounts.
• Banks may offer digital services to minors—based on internal risk policies.
• Overdrafts are not allowed.
• Clear transition plans must be in place for minors turning 18.

Let’s now unpack each of these changes and understand what they mean for parents, children, and the banking ecosystem.

RBI’s Fresh Guidelines on Minor Accounts: Full Breakdown

1. Eligibility to Open an Account

As per the new directive:

• Minors of any age can open a savings or term deposit account, but it must be operated through their natural or legal guardian
• The mother can act as a guardian, as permitted by the long-standing RBI circular (DBOD.Leg.BC.158/C.90(H)-76, dated December 29, 1976).  

What This Means: Parents or legal guardians can now open deposit accounts for children from birth, giving families the option to start saving and investing early for future goals like education or marriage. 

2. Independence at 10+ Years

Minors aged 10 years or older may open and operate accounts independently, but:

• The account must stay within limits set by the bank.
• Terms and conditions should align with the bank’s risk management policies.
• The bank must clearly communicate these terms to the young account holder.

What This Means: A tech-savvy 12-year-old can have their own bank account with limited digital privileges—promoting financial independence under structured supervision.

3. Banking Services Allowed (But Not Mandatory)

Banks may offer additional facilities to minor accounts, such as:

• Internet banking
• ATM or Debit Cards
• Cheque books

However, these services are not compulsory and depend on:

• The bank’s risk assessment
• The product’s suitability for the minor
• The appropriateness of offering such features to a young user

What This Means: Banks can now introduce tiered products for minors—offering more advanced services as children grow older and demonstrate responsibility.

4. What Happens at 18? 

When a minor turns 18 (the age of adulthood):

• Banks must collect new operating instructions and specimen signatures.
• If a guardian operated the account, the balance must be verified.
• Banks must take advance action, notifying the account holder about upcoming changes and requirements.

What This Means: There will be a smooth and planned transition from minor to adult accounts, avoiding operational hiccups or confusion.

5. Strictly No Overdrafts

Accounts operated by minors—whether independently or via guardians—cannot be overdrawn. These accounts:

• Must always maintain a credit balance
• Cannot avail of any loan or credit facility under this category
   

What This Means: This acts as a safety guard against misuse and ensures that minors are only exposed to healthy financial habits like saving, budgeting, and tracking balances.

6. Due Diligence and KYC Rules Apply

Banks must:

• Perform Customer Due Diligence (CDD) when opening accounts for minors
• Comply with the Master Direction on Know Your Customer (KYC), 2016
• Continue to monitor and update records as the minor grows
   

What This Means: Even though minors are being given autonomy, banks must remain vigilant, just as they would for adult customers.

Why This Matters: The Bigger Picture

India has a massive youth population, and early exposure to banking can foster strong money habits, improve long-term saving behaviours, and promote financial inclusion  

By allowing children to open and manage accounts—with appropriate oversight—the RBI encourages a culture where kids don’t just receive money but learn to manage it.

This also opens up opportunities for banks to introduce educational banking products, gamified savings platforms, and financial literacy programs.