Bank Deposit Accounts - Opening Aspects, Procedure and KYC

One of the primary function of a commercial bank is accepting deposits from public and in return, bank will give interest earnings for the deposited money to the account holder depending on the type of deposit accounts. It is a three part article, which will look into various aspects of deposit accounts, its operations, and types of deposit accounts, offered our commercial banks in India. Opening aspects and KYC is the first part that everybody should know before they get into the bank for having relationship with bank and their deposit accounts.

Opening of Deposit Accounts with Commercial Banks in India

Public starts their bank relationship mostly opening a Savings bank account (SB Account) depositing small sums of amounts as and when they have surplus money in their hand.

We will get the details on how to open a very basic and simple deposit account called "SB account" or "Savings Bank Account".

To open a deposit account, person has to fill up an account opening application form, submit to the concerned branch. Application form should be accompanied with the following documents in order to avoid misuse or illegal dealings:

  1. Introductory reference of an acceptable person or an existing account holder with the branch.
  2. Acceptable proof of his / her identity and residential address. It may be one of: Aadhaar Card / photo identity card such as Passport, Ration card, PAN card, Driving license, Election identity card etc.
  3. Recent photographs (2 to 3 varies from bank to bank, branch to branch).
  4. An initial deposit amount not less than the minimum amount decided by the bank (amount varies from bank to bank ranging from 0 to Rs 10,000/ or even more).
  5. The bank keeps attested photo copies of all the documents along with the account opening form.

Need Introduction for Opening Bank Account?

Introduction is a good way for the bank to satisfy itself that the applicant is a person of certain standing and known by the bank. It protects the bank through the Negotiable Instruments Act, 1881. The Act governing the cheque - confers to all acts done "in good faith and without negligence" in relation to the account holder.

Opening an account without proper introduction would not protect the banker and he may be held liable for loss caused to others by this customer depositing forged or stolen cheque in his account and withdrawing the deposits.

Bank Deposit Account SB Passbook
Bank Deposit Account SB Passbook

Know Your Customer (KYC) Guidelines of RBI

In 2002, RBI issued an order to all banks to follow the procedure of "Know Your Customer" with all their new and existing Domestic customers and Non-resident customers. It helps to verify the identity and residential address of the customers with the help of specific documental evidence. Hence proper KYC prevents misuse of the banking system for money laundering and financing of terrorist activities.

These "Rules" would help to stop illegal moneys coming into the banking stream. It is mandatory requirement to all religious and non-religious trust accounts should also have to follow all KYC processes.

The RBI needs all banks to strictly follow the KYC guidelines and cash transaction norms. The KYC Rules of RBI support the existing practice of some banks and makes it a compulsory requirement to be followed by all the banks in regard to all of their customers who maintain domestic / Non-resident rupee / Foreign currency accounts.

Specimen Signature and Verification

A Specimen (sample) signature of the customer is obtained on the account opening form in the presence of the bank staff and it is attested by an authorized bank officer on the form itself. A customer is recognized mainly by signature on the cheque / vouchers and these are compared with the specimen signature on record to verify the genuineness of the customer’s signature.

Power of Attorney

At times a depositor would like to transact his business through another person. Banks accept this arrangement if account holder authorizes his/her representative as power of attorney. A power of attorney is a document which is correctly stamped as per Stamp Act and submitted to the bank by the account holder. Power of attorney gives permission to the person whose name is on the document to operate the account in the place of the account holder, for example - Attorney or Agent.