Minor Accounts

Minor accounts are specialised banking arrangements designed to provide financial access to individuals below the age of majority, which in India is 18 years. These accounts serve as an important instrument for early financial inclusion, savings mobilisation and the cultivation of financial discipline. Within the Indian banking and financial system, minor accounts hold particular significance as they introduce young citizens to formal finance while operating under legally safeguarded structures.

Concept and Legal Framework

A minor account is a bank account opened in the name of a person who has not attained the age of 18 years. Under Indian law, minors are not considered fully competent to enter into contracts; therefore, such accounts are subject to specific legal and operational safeguards. Typically, the account is operated by a parent or legal guardian until the minor reaches majority.
The regulatory framework governing minor accounts is shaped by banking laws, contract law and guidelines issued by the Reserve Bank of India, which ensures depositor protection and systemic stability. Banks are required to design products that balance financial access with risk control, particularly with respect to withdrawals and overdraft facilities.

Types of Minor Accounts in India

Indian banks offer several variants of minor accounts to cater to different age groups and financial objectives. The most common types include:

• Minor Savings Accounts, which encourage regular savings with low or zero minimum balance requirements
• Student or Junior Accounts, often bundled with educational benefits and financial literacy tools
• Term Deposit Accounts for Minors, allowing parents to invest on behalf of children for future needs

In certain cases, banks permit minors above a specified age, often 10 years, to operate their accounts independently within prescribed limits. This conditional autonomy supports gradual financial learning.

Operational Features and Restrictions

Minor accounts are characterised by conservative operational features to minimise financial risk. Overdraft facilities, credit cards and speculative investment products are generally not permitted. Withdrawal limits are imposed to prevent misuse and ensure parental oversight.
Key features typically include:

• Mandatory linkage with a guardian’s identity and consent
• Restricted transaction limits, especially for self-operated accounts
• Prohibition of negative balances

These features reflect the principle that minor accounts are primarily educational and savings-oriented rather than transactional or credit-based.

Role in Financial Inclusion

Minor accounts play a crucial role in advancing financial inclusion, a core objective of India’s economic policy. By introducing children and adolescents to formal banking at an early stage, the financial system builds long-term customer relationships and reduces future dependence on informal financial practices.
Such accounts complement national inclusion initiatives by familiarising households with banking services and promoting a culture of saving. Over time, this contributes to a broader deposit base for banks, supporting credit expansion and economic growth.

Contribution to Financial Literacy

Beyond inclusion, minor accounts function as tools of financial education. Exposure to passbooks, debit cards with limited functionality, and digital banking interfaces enables minors to understand fundamental financial concepts such as saving, interest and budgeting.
Banks and educational institutions increasingly collaborate to link minor accounts with structured financial literacy programmes. This early exposure supports the development of financially responsible citizens, which is essential for the efficient functioning of a modern economy.

Linkages with Banking and Financial Stability

From a systemic perspective, minor accounts contribute to banking stability by mobilising small but stable deposits. These deposits are generally long-term and less volatile, strengthening the liability structure of banks.
While individual balances may be modest, the aggregate impact is significant given India’s large youth population. By expanding the depositor base, minor accounts indirectly support credit availability for productive sectors of the economy.

Economic Significance in the Indian Context

India’s demographic profile, characterised by a large young population, amplifies the economic importance of minor accounts. Early financial engagement helps integrate future earners into the formal economy, improving tax compliance, savings rates and investment behaviour over the long term.
Minor accounts also support intergenerational wealth planning, enabling households to allocate resources efficiently for education, healthcare and entrepreneurship. In this way, they contribute to human capital formation, which is a key driver of sustained economic development.