Aashray Mohan is the proud owner of a T-shirt that says: ‘My Dad is my ATM’. She has just turned 18 and lives by that credo. When it comes to money — read cash — she turns to her parents. No visits to the bank or an ATM. If all kids were to think similarly, then the Reserve Bank of India’s (RBI) recent notification allowing minors above the age of 10 to have independent accounts, is sure going to come a cropper. Fortunately, the world thrives on different strokes for different folks, and there is 11-year-old Mihika Lal in Delhi who says she would use a debit card for “… everything. I’d tell my parents to put in a certain amount every month, and I will use it for all my expenses.”
According to RBI, these guidelines have been issued with a view to promoting the objective of financial inclusion and also to bring uniformity among banks in opening and operating accounts for minors. This is a step ahead from until recently, when minors could have accounts that were either linked to or operated by their guardian. The apex bank feels this facility will inculcate the value of money among kids. But in reality, does it? All this while when children could have minor accounts that were linked to their parent’s, most of them were blissfully unaware of what it entailed. As Atul Mohan, Aashray’s father who runs a software company says, “Now both my daughters have turned 18, but they don’t know how to write out cheques. They are, of course, getting comfortable with ATM cards now.” Mohan says he opened a savings account and a Public Providend Fund (PPF) account for both his daughters when each of them was three years old. “It was money gifted to them by their grandparents which went into these accounts — a bit of prudent tax planning.” But apart from annual deposits into their PPF accounts (a corpus of Rs 20 lakh now) there hasn’t been a single withdrawal, he says. As for independent accounts, Mohan feels children today are smart and can benefit from the facility, but if they have a choice, they would still ask their parents for ready cash.
Not all parents share this view though. Namita Minocha, housewife and mother of 11-year-old Angelina says she has an account in her child’s name, but only as a good way to save for her. “In a month she spends about Rs 1,000 on books and birthday gifts for friends, but I give her the money. I’m not in favour of kids operating accounts independently as they don’t understand the value of money. Parental consultation is a must.”
RBI spokesperson, Alpana Killawala counters this very belief when she says: “We think a 10-year-old will have a lot of pride in operating his/her account. The child might make mistakes initially, but that’s the way to learn about financial planning and the value of money.” This view is echoed by Deepak Bagla, an investment banker, who is also the father of two minor boys. “An independent account is a transition from the piggy bank at home. I think it’s a great way of inculcating the habit of saving among children. If there are checks and balances, like a cap on the amount that a child can withdraw every week, or in every transaction, parents will feel comfortable enough to go in for it.” It’s ironic though, that Bagla’s own children have never operated their bank accounts.
From his experience over the years, an HDFC branch manager (he did not want his name disclosed) observes it is usually minors in the age group of 15 to 17 who operate accounts, under parental supervision. But with time, that age might dip further. As of now, most of them are more comfortable going to an ATM and pocketing cash rather than writing out a cheque. Internet banking has caught on in a big way too he says. Echoing this, 16-year-old Minisha Lal says, “I use my debit card for everything and never carry cash. I also use my parent’s cards to buy dresses online or to party with friends.”
When Shekhar Rai, 17, was quizzed in an upmarket residential area of New Delhi about his banking habits, the conversation played out something like this: How much money do you withdraw per month? “I don’t withdraw”; Does having an account change your purchasing decisions? “Of course. You know how much you can spend once you know how much money you have”; Do you think minors should have independent accounts? “Yes. There is no point in having an account when I don’t have complete control.”
Minors having control of their account has other benefits too, according to Killawala. She says, “One of our main objectives was to send across scholarship money directly to children in rural areas. Earlier, when their accounts were linked to their guardian’s, their parents would take the money and spend it on meeting day-to-day expenses instead of sending the child to school.” Now, using the stand-alone minor account, banks intend linking scholarship money directly with the child’s school fee.
Only time will tell how this RBI diktat works out. For now, there are issues that individual banks still need to sort out. Issues like what documents need to be in place to satisfy KYC (Know Your Customer) requirements, benchmarks on how much can be withdrawn, whether debit cards and internet banking facility should be extended to minors, etc. It is learnt that the State Bank of India has already set the wheels in motion on this, by planning the issue of special cheque books for minors.
In sum, the state might provide the infrastructure, but in order to inculcate good saving and banking habits among minors it is imperative that parents play a role. Think of the occasions when a monthly bank statement goes straight into the dustbin, without so much as a casual run through. Perhaps next time you can show your child what his/her balance is and how much can be saved when the monthly statement arrives. It might just ring a bell in the mind of your impressionable child. That’s a start.
(With inputs from Gargi Verma)