What are the rules for opening account of Minor and its operation?

Answer:

 According to the law of contract, only the major i.e. persons who have completed 18 years of age can enter into contract. Since opening of bank account is a contractual relationship between the account holder and the bank, the minors can not open account because of this legal limitation. On the other hand, according to Negotiable Instruments Act-1881, minors can draw, endorse, deliver and negotiate a negotiable instrument i.e. cheque, bill of exchange or promissory note.

In view of the contradictory provisions stated above, bank normally do not open current account of the minors since money can not be realized from them in case of over draft. But minors are allowed to open savings account in one of the following ways:

1.      In the name of the minor himself.

2.      In the joint names of the minor and his /her guardian and

3.      In the name of guardian in the following manner: “XYZ, Natural guardian of A”.

When the account of the minor in his own name, his account can be debited by the cheque drawn on the bank. The minor is bound by his withdrawals. The account will continue till his attaining the majority (18 years). On majority, however, banks will obtain a balance confirmation from him and operations will be allowed as usual.

On the other hand , if the account of the minor is in joint names with the guardian, account is required to be operated jointly. But if the account is in the name of the guardian under the style as shown at (3) above, the account will be operated by the guardian on behalf of the minor. On attaining majority, however , in case of the letter two mentioned above, the account will be operated by the minor turned major. Bank, however prefers then to close the account and transfers the balance to the new account.