Banking for minors: A progress whose time has come

At first glance, these events seem unconnected. But in fact, both point to a pivotal shift in India’s payment ecosystem over the last decade. Two trends stand out. One, Indians have embraced digital payments with gusto—the rapid adoption of UPI as a payment system is both a cause and a consequence of this shift. Two, most retail, day-to-day digital payments are made using a mobile phone app. In volume terms, mobile payment was 37 times net banking payment in 2024-25, but in value terms, the share of mobile payments dropped to less than one-third. This clearly indicates that mobiles are being used for multiple small-value daily transactions.

India has a smartphone user base of around 700 million and over 1 billion cellular connections, as per Telecom Regulatory Authority of India (Trai) data as of December 2024. As a nation, our collective mobile usage has jumped after the covid pandemic, but the steepest rise is seen in the 10-19 years age group. 

Skilled mobile phone usage is not limited to pre-teens and teenagers from affluent urban families. The Annual Status of Education Report (ASER) 2024 report showed that among 14-16 year olds in rural India, more than three-fourths of the surveyed sample were able to use a smartphone efficiently to perform assigned digital tasks.

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Now put these facts together: if the mobile phone is the payment mode of the future, and youngsters are the biggest (and probably most adept) mobile phone users, then tweaking existing regulations to give greater operational freedom to minors in managing their bank accounts simply aligns regulation with reality.

Use cases

Minors are already allowed to open bank accounts through a parent or guardian, but “independent” minor accounts offer some additional benefits. First, there are multiple use cases now which did not exist a few years ago. UPI has made it easier to go cashless, and having one’s own bank account can fund such payments. In particular, older minors—14 to 18-year-olds—who often make small purchases independently will benefit from this change. Examples of usage include using a ride-hailing app to book a taxi/three-wheeler to return home after a tuition class, buying food at the canteen, or purchasing school supplies from a market.

Second, this measure adds another digital payment solution for those under 18 years of age. The market currently has a variety of players. Banks already offer debit cards and mobile apps linked to minor accounts jointly held with a parent or guardian. Limited-use mobile wallets (Google Pay wallets for ages 13-18 years) and “pocket money” digital wallets that do not require a bank account (Junio, FamPay, Fyp) are other options. 

In August 2024, UPI Circle was introduced to allow a secondary user (say, a minor) to make UPI payments using the bank account of a primary UPI user (parent or guardian). Clearly, there is plenty of demand, and the RBI has simply widened the available choices.

Third, working with minors provides banks with a chance to build a future customer base. Currently, minor accounts form less than 1% of total bank deposits. But once they become earning adults, they are likely to contribute much more to the deposit base. Cultivating their loyalty is a great customer acquisition opportunity.

Catch them young

Digital platforms have transformed the way young adults borrow and invest. Many young borrowers turn to fintechs and NBFCs, rather than banks, for small-value loans. These loans are often digitally processed and do not require much credit history. That makes it easy to borrow: a YouGov survey in 2024 showed that more than 20% of Gen Zs had taken a loan in the past six months. Simultaneously, more young people are investing actively in the stock market: the median age of new investors in the National Stock Exchange is merely 32 years, with 40% below the age of 30.

Also Read: Digital divide: Are we leaving our senior citizens behind?

This has led to a situation where youngsters have the tools to leverage and invest, and the aspiration to grow wealth, but not enough knowledge of financial products and concepts. A National Centre for Financial Education (NCFE) survey in 2019 found that only 30% of 18-29 year olds were financially literate. A more recent RBI study (2023) also showed that adults under 30 had lower scores on financial literacy as compared to older cohorts. Clearly, there is a need to promote financial literacy.

The RBI has launched several initiatives to improve financial awareness: allowing minors (10 years and older) into the banking system should be viewed as one such initiative. Taking ownership of one’s own account and finances at a young age empowers individuals to budget for their needs and save regularly, and provides an early start to financial education. Only then will our young people be financially smart enough to become digital champions.

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The author is an independent writer in economics and finance.