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Illustration: Jayachandran / Mint

Illustration: Jayachandran / Mint

Nuclear family, but with extended bank accounts

Nuclear family, but with extended bank accounts

Does your daughter study in another city or your parents, based in your hometown, need financial support from you? If yes, you may want to make their banking lives easier. You can do this by using a new banking product called the family savings account that is currently being offered by a few banks.

Illustration: Jayachandran / Mint

Sid: Meena. Hey! What’s new? Where to?

Meena: Just coming back from the post office, dude.

Sid: What? Sending speedpost? You must be the only person in there.

Meena: (chilled voice) Actually, I went to send a money order to my parents back in Baroda.

Sid: Like I said. Seems you’ve not heard about family banking. It’s a savings bank account that makes sending money to family members living in other cities simple.

Meena: (warming up a bit) Really? Tell me more.

Sid: (obviously enjoying the attention) It’s like having a banking counterpart to your family doctor or lawyer. You open a group of accounts under the umbrella of a family name. So each family member gets a separate account, but each is linked to the main account.

Meena: Awesome! Like a joint family with separate kitchens.

Sid: Uh? Whatever. So, there are two types of family banking accounts. First is called a family savings group programme, offered by banks such as HDFC Bank Ltd and ICICI Bank Ltd.

Under this, you can have up to six accounts (depending on the bank) in a single group. So, your father, son, spouse and you can have separate banking relationships with, say, HDFC Bank, and can yet be part of a common family savings group. In fact, Barclays GRB India also includes your maid and driver in your family.

The second type is offered only by Kotak Mahindra Bank Ltd and is slightly different. Here the main account holder can extend some of the privileges of his account to the accounts of other family members.

Meena: A bit like a joint account?

Sid: Nope, each of the accounts can be operated independently, unlike a joint account. So you can’t really get hold of the cash in your account while in a joint account.

Meena: Who can open such accounts?

Sid: Resident Indians, trusts, clubs and even foreign nationals in India can apply.

Meena: But what’s special about a family banking account? What do you get here that you may not get in a joint account?

Sid: To start with, you get to operate your individual accounts separately. Then, any member of the group can opt for privacy of individual account statements. Joint accounts lack these facilities. The biggest plus is that the group needn’t maintain an average quarterly balance in all the accounts.

In the first type of family accounts, the bank considers the combined balance of all the accounts put together. In effect, it is enough if only one person maintains the balance. For instance, in HDFC Bank, the combined balance in all the accounts in a group should be Rs40,000.

Meena: That’s too steep!

Sid: Hear me. Under the second type, only the main account holder needs to maintain the minimum balance. In Kotak Mahindra Bank’s family account, which allows a combination of three accounts, the average quarterly balance needs to be Rs10,000 in the account of the main holder.

Meena: Hmm. What else?

Sid: Family accounts offer more than regular facilities that come with a savings or joint account, such as monthly statements, SMS alerts and debit cards.

Some banks offer a free bill payment facility to all the members of the group, a service that can benefit your parents or kids wanting to pay their bills in a different city.

Meena: But, how does it take care of that Baroda issue for me?

Sid: So use the sweep-in facility that allows money to flow to other accounts. It enables family funds transfer from one member’s account to another’s. And that solves your money order problem for you.

Also, members can deposit and withdraw at any branch of the bank up to a certain limit. This means your parents can walk up to any branch in a different city and still continue banking. Some banks even give doorstep banking facility. So, the funds can reach your parents at the doorstep.

And you know what, you and your parents can even jump queues in the bank.

You can also set a demand draft up to a certain limit free of cost. There are no cheque book issuance charges.

Meena: Is there more?

Sid: Banks offer group lockers at a discounted rate. Special benefits, such as online trading accounts are also available. For instance, HDFC Bank opens an add-on trading account for your spouse or parent free of cost. All members also get a free credit card each based on their credit eligibility. Some even give a 3-5% discount on gold coins.

Meena: Sounds like a sales spiel now Sid. Are you a banker?

Sid: (on a roll by now) If one member opts for wealth management services, it is provided free to other members by banks such as ICICI Bank. A dedicated branch relationship manager is assigned to the group so that the banking needs of the family is addressed.

Meena: What if one member of the family issues a cheque, but doesn’t have the required amount in his individual account?

Sid: In that case, the primary member’s account will be debited for the extra amount. So, the chances of a bounced cheque get minimized here. However, the primary member cannot issue a cheque for an amount more than the balance in his account.

Meena: So what does it cost?

Sid: That’s the best part. You don’t need to pay any extra fee to start a family saving group account. However, if the minimum balance is not maintained or there is a cheque bounce, you are liable to pay a fine. In the first type of family account, only the primary member is fined for not maintaining the minimum balance. But, in the second type, all the members will be fined.

Meena: How is it taxed?

Sid: Just like that in a regular savings account. There will be tax deduction at source on all the accounts.

Meena: What happens in case a member dies?

Sid: If the primary member dies, the account gets dissolved. If some other member dies, the other members need to inform the bank.

Meena: What else should I know about it?

Sid: You need to compare the features of family accounts in different banks. For instance, the minimum balance requirement can vary between Rs10,000 and Rs1 lakh. So, best of luck.

Meena: Is this guy a banker?


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