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small bank accounts

https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11566

RBI had allowed small bank accounts to be opened vide the above circular. The small accounts was to operational only for a period of 12 months followed by another 12 months upon review. This is basically to mitigate the suffering of those poor & marginal sections of the society, who might not have an officially valid document (OVD). So they were allowed to produce this OVD within this period of 24 months by the banker. Now in view of the Covid crisis, they have been allowed to remain as small bank accounts upto 30th June, 2020 without being disturbed. 

The gist of the above circular relating to small accounts and the fresh circular giving this relief is produced hereunder.

23. 25Notwithstanding anything contained in Section 16 and as an alternative thereto, in case an individual who desires to open a bank account, banks shall open a ‘Small Account’, which entails the following limitations:

  1. the aggregate of all credits in a financial year does not exceed rupees one lakh;
  2. the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand; and
  3. the balance at any point of time does not exceed rupees fifty thousand.

26Provided, that this limit on balance shall not be considered while making deposits through Government grants, welfare benefits and payment against procurements.

Further, small accounts are subject to the following conditions:

  1. The bank shall obtain a self-attested photograph from the customer.
  2. The designated officer of the bank certifies under his signature that the person opening the account has affixed his signature or thumb impression in his presence.

    27Provided that where the individual is a prisoner in a jail, the signature or thumb print shall be affixed in presence of the officer in-charge of the jail and the said officer shall certify the same under his signature and the account shall remain operational on annual submission of certificate of proof of address issued by the officer in-charge of the jail.

  3. Such accounts are opened only at Core Banking Solution (CBS) linked branches or in a branch where it is possible to manually monitor and ensure that foreign remittances are not credited to the account.
  4. Banks shall ensure that the stipulated monthly and annual limits on aggregate of transactions and balance requirements in such accounts are not breached, before a transaction is allowed to take place.
  5. The account shall remain operational initially for a period of twelve months which can be extended for a further period of twelve months, provided the account holder applies and furnishes evidence of having applied for any of the OVDs during the first twelve months of the opening of the said account.
  6. The entire relaxation provisions shall be reviewed after twenty four months.
  7. 28Notwithstanding anything contained in clauses (e) and (f) above, the small account shall remain operational between April 1, 2020 and June 30, 2020 and such other periods as may be notified by the Central Government.
  8. The account shall be monitored and when there is suspicion of money laundering or financing of terrorism activities or other high risk scenarios, the identity of the customer shall be established as per Section 16.
  9. Foreign remittance shall not be allowed to be credited into the account unless the identity of the customer is fully established as per Section 16.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11857&Mode=0

Government of India, vide Gazette Notification G.S.R. 228(E) dated March 31, 2020 has notified amendment to the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.

2. Consequent to the aforementioned amendment to the PML Rules, Master Direction on KYC dated February 25, 2016 has been updated as under:

Clause (g) has been inserted in the conditions stipulated for Small Accounts in Section 23 of the MD. Clause (g) reads as,

“Notwithstanding anything contained in clauses (e) and (f) above, the small account shall remain operational between April 1, 2020 and June 30, 2020 and such other periods as may be notified by the Central Government.”

3. The Master Direction on KYC dated February 25, 2016, is hereby amended to reflect the above change and shall come into force with immediate effect.

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