Guidelines for Opening Accounts

Guidelines for Opening Accounts- All banks follow a certain set of guidelines before opening a new account or any new financial activity such as loans, trading, etc. The precautions that banks take most of which is dictated by the RBI are

Due Diligence Process: Under “Know Your Customer” (KYC), a bank has to carry out due diligence before opening any deposit account. The ‘due diligence’ process involves the bank having adequate knowledge of the person’s identity, occupation, sources of income, and location.
Minimum Balance: For products like a savings bank account or a current account, banks normally stipulate certain minimum balances to be maintained. For people below the poverty line, banks encourage the opening of ‘No-frills Accounts’, typically a special savings bank account where no minimum balance requirement is required.
Transparency: All such details regarding terms and conditions for the operation of the accounts and schedule of charges for various services provided should be communicated to the prospective depositor while opening the account. The transparency of charges levied include the charges attached to issue of cheques books, additional statement of accounts, duplicate passbook, folio charges and charges upon failure to maintain minimum balance in the accounts.
Eligibility: The criteria for a savings account and a current account are similar, but while both the accounts can be opened by individuals, the savings account cannot be opened by a firm. Term Deposit Accounts can be opened by all categories of account holders.
Permanent Account Number: Banks are required to obtain a Permanent Account Number (PAN) from the prospective account holder or alternate declarations as specified under the Income Tax Act.
Operation of Joint Account: A joint account can be operated by a single individual or by more than one individual jointly. The mandate for who can operate the account can be modified with the consent of all account holders.
Power of Attorney: At the request of the depositor, the bank can register a mandate/power of attorney given by him authorizing another person to operate the account on his/her behalf.
Closure/renewal of deposits: In the absence of a mandate with regard to the closure of deposit account or renewal of deposit for a further period on the date of maturity, the bank will be at liberty to roll over the deposit on the due date.
Nomination: A depositor authorizes someone who would receive the money from his/her account when the depositor passes away. This is called the nomination process.