KYC norms for bank account opening for mentally challenged persons

RBI had vide its notification no. RBI/2013-14/444 DBOD.No.Leg.BC.84/09.07.005/2013-14 dated 13th January, 2014 laid down guidelines for opening/ operating bank accounts for mentally challenged persons i.e. persons suffering from autism, cerebral palsy, mental retardation and any other form of mental disability. According to the said guidelines, 

1. The Mental Health Act, 1987 provides for a law relating to the treatment and care of mentally ill persons and to make better provision with respect to their property and affairs. According to the said Act, “mentally ill person” means a person who is in need of treatment by reason of any mental disorder other than mental retardation. Sections 53 and 54 of this Act provide for the appointment of guardians for mentally ill persons and in certain cases, managers in respect of their property. The prescribed appointing authorities are the district courts and collectors of districts under the Mental Health Act, 1987.
2. The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 provides for a law relating to certain specified disabilities. Clause (j) of Section 2 of that Act defines a “person with disability” to mean a person suffering from any of the conditions relating to autism, cerebral palsy, mental retardation or a combination of any two or more of such conditions and includes a person suffering from severe multiple disabilities. This Act empowers a Local Level Committee to appoint a guardian, to a person with disabilities, who shall have the care of the person and property of the disabled person.
3. Banks are advised to take note of the legal position stated above and may rely on and be guided by the orders/certificates issued by the competent authority, under the respective Acts, appointing guardians/managers for the purposes of opening/operating bank accounts. In case of doubt, care may be taken to obtain proper legal advice.

Subsequently it has been brought to the notice of the RBI that the banks have been insisting upon the guardianship certificate from all mentally ill persons, Therefore RBI has clarified vide its notification no. RBI/2015-16/321 DBR.No.Leg.BC.78/09.07.005/2015-16 dated 11th February, 2016 that "paragraph 2(iii) of the aforesaid circular is not intended to mandate banks to insist on  appointment of a guardian as a matter of routine from every person “who is in need of treatment by reason of any mental disorder”. It would be necessary for banks to seek appointment of a guardian only in such cases where they are convinced on their own or based on documentary evidence available, that the concerned person is mentally ill and is not able to enter into a valid and legally binding contract."

Banks therefore have to exercise their judgment and call for documents only if they feel or have documentary evidence that the person is incapable of operating the bank account and needs guardian to take care of him.