If you are a parent investing for your minor child, or planning to do so, then SEBI’s new circular is important for you. Here’s what has happened.

On 24 December 2019, SEBI issued a circular to standardise the process of investment by minors (those younger than 18 years old). This states that:

1. Investments can only be made from the bank account of the minor child  or from a joint account of the minor child with the guardian. For existing folios, the payout can only be made to such accounts.

2. When the minor child turns 18, complete KYC needs to be done along with a mandatory change to the bank account of the now adult child 

3. All transactions including SIPs, STPs, SWPs on the child’s account will be stopped when he or she turns 18 and resumed only when the KYC & bank account change are completed. 

For  withdrawals,  there is no change 
– if the linked bank account is of minor, withdrawals are permitted
– if linked bank account is of guardian, withdrawals are not permitted

What is the change?

1. SEBI has now mandated a uniform process across mutual fund companies. This is a good thing.

2. Investments could, until now, be made from a Guardian bank account. This will stop. A bank account of the minor (either single or joint with Guardian) is required. This is the big change from the practice so far. 

3. For  withdrawals,  there is no change 

  – if the linked bank account is of minor, withdrawals are permitted

  – if linked bank account is of guardian, withdrawals are not permitted

4. The minor to major change process will become uniform across mutual fund companies.

How does this impact you as an investor with Scripbox? 

1. There is no issue with investments already made.

2. Those investors who have minor accounts investing from guardian’s bank account, should immediately open bank accounts for the child and request a bank change. We are reaching out to guardians of all impacted Scripbox accounts. 

3. Once bank change is made, there is no other action required for Scripbox investors. (For those investing outside Scripbox, new SIP instructions may need to be placed after change of bank account.)

How to open a bank account for your child? 

Go to a bank of your choice and fill up the necessary forms. Most banks will make this quite easy for you. A PAN for the minor child is NOT mandatory. 

If you have any questions, please use the comments section below.