A trust is a fiduciary relationship between the trustor and the trustee. A Trustor is just the person who creates and opens a Trust. A trustee is a person or an entity created and entrusted with property/assets to deal with for the benefit of a certain person or persons called ‘beneficiaries’.
A trust is created by means of a written document known as a trust deed. The trust deed contains important details. An object of the trust, Names of trustees and power vested with them, The Beneficiaries, and terms and conditions to administer the trust property. The person who transfers his property to the trust is called a “settler” or “author of Trust”. A trust can be formed for charitable or religious or educational or scientific purposes. The Trust formed for the promotion of public welfare is called Public Trust. The Trust which is created for charitable purposes is called a charitable trust. A trust created for the benefit of specified /definite ascertainable individuals is called a private trust. The privileges and tax benefits that are enjoyed by the public trusts or NGOs are not enjoyable by these private trusts. The Certified copy of the Trust Deed document is generally required for opening a Trust account in the banks, if there is no Trust Deed, a certified copy of the order from a competent Court in this regard is to be submitted. As branch officials may not be aware of complications in opening Trust accounts, the permission of the administrative office is required in many banks to open trust accounts. The legal department of the administrative office will scrutinise the trust deed or order of a competent court and then permit the branch to open the account to avoid any complications in the future.
Trust accounts must be opened and led entirely as per the terms of the trust deed. Every one of the trustees is required to act jointly with the persons so approved by the enrolled trust deed. Trustees have no force to delegate their power to one or more unless the force of appointment is approved by the trust deed or is as per the bearings of the court on an application made by the trustees. The trustee should be stationed within the jurisdiction of the court where the trust is located. But where the trust property is a movable asset, the trustee need not be stationed within any single jurisdiction.
For KYC purposes following documents are required;
1. Copy of the Trust deed,
2. Registration certificate of the Trust,
3. If the Trust is not registered, PAN Number/Acknowledgement copy of the Income Tax return,
4. Certified copy of the resolution regarding the opening and operation of the account.
5. Details of all the present trustees, settlers, beneficiaries, and signatories with their identity and address proof,
6. Copy of power of attorney granted to any employees to transact the business of the trust.
7. Registered & communication address of the Trust with Telephone/fax number/e-mail address.
While opening Current Accounts of all categories of depositors including proprietors, partners, trustees, settlers, beneficiaries and those holding power of attorney, founders, managers, directors, etc. the customers need to submit ‘know your customer’ related official valid documents of the entities and natural persons behind the entities. As per RBI guidelines, in addition to seeking NOC from the existing bankers of the prospective current account customer, banks should seek information from CRILC and verify the data received from the CRILC, whether the prospective customer is enjoying credit facilities from another bank. Also, banks have to seek a ‘No Objection certificate’ from the drawee bank where the initial deposit to the current account is made by way of a cheque.
Entities are eligible for maintaining Savings Accounts under Trust/NGO segment-
Primary Co-operative Credit Society (which is being financed by the bank)
Khadi and Village Industries Boards
Agriculture Produce Market Committees
Societies registered under the Societies Registration Act, 1860 or any other corresponding law in force in State or a Union Territory (except societies registered under the State Co-operative Societies Acts and specific state enactment creating Land Mortgage Banks)
Section 25 Companies (as per Companies Act, 1956) or Section 8 Companies (as per Companies Act,2013). Do note that these companies cannot open Savings Bank A/c (SB A/c) for business purposes as per RBI directives and hence SB a/c should be used to route transactions of only non-business / non-commercial nature.
Institutions/entities whose entire income is exempt from payment of Income-tax under the Income-Tax Act, of 1961
Government departments/bodies/agencies in respect of grants/ subsidies released for implementation of various programmes/ schemes sponsored by Central/State Government (subject to production of an authorisation from the respective Government departments to open a savings bank account)
Development of Women and Children in Rural Areas (DWCRA)
Self-help Groups (SHGs), registered or unregistered, are engaged in promoting savings habits among their members
Farmers’ Clubs – Vikas Volunteer Vahini – VVV
Originally posted on August 30, 2017, edited and reposted on April 1, 2023.