The Reserve Bank of India (RBI), a government agency charged with overseeing the Indian financial sector, reportedly has decided to allow minors over 10 years of age to open savings accounts at banks without the supervision of a guardian. Under this directive, individual banks can set higher minimum age requirements and the level of access minors can have to their accounts, in addition to determining what documentation must be provided by underage customers. As part of the new ordinance, minors with accounts may also use internet banking, automatic teller machines (ATMs) and debit cards. Before this change, the minimum age for a person to open an account was 12 years old. The Housing Development Finance Corporation Bank (HDFC Bank), an Indian financial services company with branches in 2,171 cities and towns across the country; Industrial Credit and Investment Corporation of India (ICICI Bank), an India-based bank operating in 19 countries; and Kotak Mahindra Bank, an Indian bank headquartered in the city of Mumbai, all offer independent accounts held by people under the age of 18.
Soumya Kanti Ghosh, chief economic advisor at the State Bank of India (SBI), a government-owned bank and financial services company, praised the new option, reportedly stating, “This is a positive step and is directed towards enabling more people to have bank accounts, with an objective of financial inclusion… This will help banks get more accounts into their fold” [1].
RBI reported total reserves of USD 263 billion as of February 2014. HDFC Bank is headquartered in Mumbai and reported total assets equaling approximately USD 82.9 billion in March 2014. As of March 31, 2013, ICICI Bank reports total assets of INR 5.4 trillion (USD 90.3 billion) and profit after tax of INR 83.3 billion (USD 1.4 billion). Kotak Mahindra Bank reports total assets of INR 1.2 trillion (USD 20.6 billion) and a return on assets of 2.1 percent as of April 2014 [2]. For the fiscal year 2013, SBI reported total deposits of INR 12.0 trillion (USD 222 billion), net profit of INR 141 billion (USD 2.59 billion), return on assets of 0.91 percent and return on equity of 15.94 percent.
By Benjamin Krupp, Research Associate
About HDFC Bank
HDFC Bank Limited was incorporated by Housing Development Finance Corporation Limited (HDFC), a private-sector Indian housing finance company, when the Indian government allowed the establishment of private sector banks in 1994. HDFC Bank offers a range of services to retail and wholesale banking customers, as well as specialized services for non-resident Indians. Headquartered in Mumbai, the bank has a network of 3,403 branches in 2,171 cities and towns across India. As of March 2014, HDFC Bank reported approximately USD 82.9 billion in total assets.
About ICICI Bank
ICICI Bank Limited, a banking and financial services company, operates 3,100 branches and 10,500 automated teller machines (ATMs) in India and has a presence in 18 other countries in Asia, Europe, the Middle East and North America as of 2013. ICICI Bank offers personal banking, business banking, agricultural banking, investment banking, life and non-life insurance, venture capital and asset management services. As of March 31, 2013, ICICI Bank reports total assets of INR 5.4 trillion (USD 90.3 billion) and profit after tax of INR 83.3 billion (USD 1.4 billion). ICICI Bank’s equity shares are listed in India on the Bombay Stock Exchange and the National Stock Exchange of India Limited, and its American depositary receipts (ADRs) are listed on the New York Stock Exchange.
About Kotak Mahindra Bank
Kotak Mahindra Bank is a private bank based in Mumbai, India. It operates under the umbrella of the Kotak Mahindra Group, which also offers stock brokerage, mutual funds, life insurance and investment banking. The bank was originally founded in 1985 as Kotak Capital Management Finance Limited, a non-banking financial organization. In 2003, it was converted into a bank. In November 2009, Kotak Mahindra Bank began participating in the International Finance Corporation’s Global Trade Finance Program, receiving a trade financing line of credit of USD 51 million to lend to small and medium-sized enterprises (SMEs).
About State Bank of India (SBI)
State Bank of India (SBI) was founded in 1955 by an act of Parliament. It provides investment, consumer, commercial, retail and private banking services, as well as asset management, pension, mortgage and credit card services. For the fiscal year 2013, SBI reported total deposits of INR 12.0 trillion (USD 222 billion), net profit of INR 141 billion (USD 2.59 billion), return on assets of 0.91 percent and return on equity of 15.94 percent.
About Reserve Bank of India (RBI)
Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While non-banking financial companies such as for-profit microfinance institutions (MFIs) operate under RBI regulations, the responsibility for inspecting agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5-percent stake in the outfit, RBI owns a 0.5-percent stake in NABARD as of March 31, 2013. RBI reported total reserves of USD 263 billion as of February 14, 2014.
Sources and Additional Resources
[1] Business Standard, “Savings Accounts for Minors to Promote Financial Inclusion,” May 9, 2014, http://www.business-standard.com/article/finance/savings-accounts-for-minors-to-promote-financial-inclusion-114050900173_1.html
[2] Kotak Mahindra Bank, “Earnings Update,” http://ir.kotak.com/downloads/pdf/Q4FY2013-14_earnings_update.pdf
MicroCapital.org article, April 14, 2014, “Reserve Bank of India (RBI) Grants Preliminary Approval to Microlender Bandhan to Receive Banking License,” https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-rbi-grants-preliminary-approval-to-microlender-bandhan-to-receive-banking-license/
MicroCapital.org special report, November 12, 2013, “Youth Financial Inclusion Group Tackles Business Training, Scaling-up, Dormant Accounts, Program Indicators, Self-sufficiency at European Microfinance Week,” https://www.microcapital.org/special-report-youth-financial-inclusion-group-tackles-business-training-scaling-up-dormant-accounts-program-indicators-self-sufficiency-at-european-microfinance-week-emw2013/
MicroCapital.org article, March 21, 2014, “By December, Reserve Bank of India (RBI) May Issue First New Banking Licenses Since 2004,” https://www.microcapital.org/microcapital-brief-by-december-reserve-bank-of-india-rbi-may-issue-first-new-banking-licenses-since-2004/
MicroCapital Universe Profile: Reserve Bank of India (RBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29
MicroCapital Universe Profile: HDFC Bank, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=HDFC+Bank
MicroCapital Universe Profile: ICICI Bank, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=ICICI+Bank
MicroCapital Universe Profile: Kotak Mahindra Bank, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Kotak+Mahindra+Bank
MicroCapital Universe Profile: State Bank of India, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=State+Bank+of+India
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