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Current Account

A current account, primarily used by businesses for frequent transactions, facilitates deposits, withdrawals, and contra transactions without notice. Known for its flexibility, it supports cheque payments to creditors and collections from customers. Available in both cooperative and commercial banks, it requires an initial deposit ranging from Rs. 5,000 to Rs. 25,000 in India. Unlike savings accounts, it typically does not earn interest.

Importance of having a current account

A current account is essential for both individuals and businesses due to its ability to handle large volumes of transactions. It allows for direct payments to be made quickly and efficiently, which is crucial for businesses managing regular expenses and payroll. Additionally, current accounts provide access to overdraft facilities, offering a financial safety net for unexpected expenses or cash flow issues.

In business, current accounts play a significant role in progress and convenience through Internet and mobile banking. These digital platforms allow for easy and convenient management of finances, offering features such as online transfers, bill payments, and real-time transaction tracking. This level of accessibility and control over finances is essential for businesses to stay organized, make strategic financial decisions, and ultimately progress toward their goals.

Overall, having a current account is vital for managing large transactions, making direct payments, and accessing crucial financial tools that contribute to the progress and convenience of both individuals and businesses. The added convenience of internet and mobile banking makes it an indispensable tool for efficient financial management.

Features of a Current Account

Current accounts offer a range of features designed to support the financial activities of businesses, professionals, and traders. Here are the key features of a current account:

  1. High Transaction Volume: Designed to handle a high volume of transactions, including deposits, withdrawals, and transfers, without any limit on the number of transactions per day.
  2. Overdraft Facility: Many banks offer an overdraft facility for current accounts, allowing account holders to withdraw more money than is available in their account, up to a certain limit.
  3. Cheque Facility: Provides checkbooks to account holders for making payments and transactions, facilitating easy business transactions.
  4. Internet and Mobile Banking: Offers online banking services, enabling account holders to conduct transactions, make payments, and manage their accounts online or via mobile apps.
  5. Multi-currency Accounts: Some current accounts allow transactions in multiple currencies, which is beneficial for businesses involved in international trade.
  6. No Interest Earned: Typically, current accounts do not earn interest on the balance maintained in the account, as they are meant for transactional purposes.
  7. Minimum Balance Requirement: Banks may require a minimum balance to be maintained in the account, which can vary significantly from one bank to another.
  8. Direct Debits and Standing Orders: Allows for the setting up of direct debits for automatic bill payments and standing orders for regular payments, streamlining financial operations.
  9. Merchant Services: Many banks offer merchant services with current accounts, including credit card processing, payment gateways, and POS (Point of Sale) systems for business transactions.
  10. Customized Banking Solutions: Depending on the business size and nature, banks may offer customized banking solutions, including specialized account management services, to meet specific needs.

These features make current accounts an essential tool for businesses and professionals, providing them with the flexibility and functionality needed to manage their finances effectively.

Direct payments

To set up direct payments from your current account, you can arrange for direct debits or standing orders to make regular payments. For direct debits, you provide the company or organization with your account details, and they will request the money from your account on a set date. With standing orders, you set up the payment yourself through your bank, specifying the amount and frequency of the payment.

Direct payments can be used to receive regular income such as salary, pension, or benefits payments directly into your account. This provides a convenient and efficient way to manage your finances.

In addition, you can also consider utilizing an arranged overdraft facility for borrowing small amounts in the short term. This can help cover unexpected expenses or cash flow shortages. It's important to be aware of the potential fees and interest that may apply when using an arranged overdraft and to only borrow what you can comfortably repay.

Overall, direct payments provide a convenient way to manage regular expenses and income, while an arranged overdraft can offer a flexible solution for short-term borrowing needs.

Minimum balance requirement

Different regular current account variants offered by banks in India have varying minimum balance requirements. The minimum balance for these accounts typically ranges from Rs. 1,000 to Rs. 25,000, depending on the bank and the specific variant. The monthly average balance (MAB) requirement also varies, with some accounts requiring an MAB of Rs. 5,000 to Rs. 10,000. Additionally, the cash deposit limit for these accounts is usually set at a certain amount, such as Rs. 50,000 to Rs. 1 lakh per month.

Maintaining the minimum balance is crucial for a current account as it helps account holders avoid penalty charges imposed by banks for failing to meet the requirement. These charges can significantly impact the account holder's finances, making it important to closely monitor and manage the account balance. Overall, understanding the minimum balance requirements for different regular current account variants is essential for account holders to effectively manage their finances and avoid unnecessary charges.

Overdraft facility

An overdraft facility is a banking arrangement that allows account holders to withdraw more money than they have in their account, up to a certain limit. The maximum amount available for an overdraft is determined by the bank based on the account holder's credit history and financial situation. Interest rates for using an overdraft facility are typically higher than those for standard loans or credit cards.

The potential consequences of using an overdraft facility include incurring high-interest charges, penalty fees for exceeding the agreed limit, and damaging one's credit score if the overdraft is not promptly repaid. However, an overdraft facility can be advantageous in situations where unexpected expenses arise or during temporary cash flow shortages.

It may be advantageous to use an overdraft facility when faced with urgent bills or when waiting for a paycheck. However, it should be avoided for long-term borrowing and should not be relied upon as a regular source of funds. Overuse of an overdraft facility can lead to a cycle of debt and financial instability. Therefore, it's important to use it responsibly and repay the amount owed as soon as possible.

Types of Current Accounts

Current accounts are tailored to meet the diverse needs of businesses, professionals, and traders. Here are the primary types of current accounts available:

  1. Standard Current Account: The most basic form, offering standard features like cheque book facility, internet banking, and over-the-counter transactions, suitable for small businesses and traders.
  2. Premium Current Account: Designed for businesses with higher transaction volumes, offering enhanced features such as higher daily transaction limits, lower service charges, and sometimes, preferential treatment in processing.
  3. Foreign Currency Current Account: Aimed at businesses dealing in international trade, allowing transactions in foreign currencies, which helps in managing exchange rate risks.
  4. Flexi Current Account: Offers the flexibility of linking the current account with a term deposit account. Excess funds in the current account can be automatically transferred to the term deposit to earn higher interest.
  5. Packaged Current Account: Comes with a bundle of additional services such as insurance, free or discounted banking services, and business support services, often for a monthly fee.
  6. Zero Balance Current Account: Specifically designed for startups or small businesses, this account does not require a minimum average balance but may have limitations on transactions or services offered.
  7. Non-Profit Organization (NPO) Current Account: Tailored for charities, trusts, and non-profit organizations, recognizing their unique banking needs and often offering free banking services or lower charges.
  8. Sector-Specific Current Accounts: Some banks offer current accounts specifically designed for certain sectors or industries, such as accounts for lawyers, doctors, or traders, with features and benefits tailored to the profession's needs.

Each type of current account comes with its own set of features, benefits, and eligibility criteria, designed to cater to the specific banking needs of different customer segments in India.

How to open a Current Account in India online?

Opening a current account online in India has become a streamlined process, allowing businesses and professionals to initiate and complete the application from the comfort of their homes or offices. Here are the general steps involved in opening a current account online:

Choose the Right Bank and Account Type

  • Research: Start by researching various banks and the types of current accounts they offer. Consider factors like minimum balance requirements, transaction fees, overdraft facilities, and additional services.
  • Select: Choose a bank and an account type that best suits your business needs.

2. Visit the Bank’s Website

  • Navigate to the official website of the bank where you wish to open your current account.
  • Look for the current accounts section or use the website's search feature to find the online application page.

3. Fill Out the Application Form

  • Application Form: Complete the online application form with details such as your name, business name, type of business, address, contact information, and other required details.
  • KYC Documents: Prepare to upload digital copies of the required KYC (Know Your Customer) documents. This typically includes identity proof (like a PAN card), address proof (like utility bills or lease agreements), and business-related documents (like a registration certificate, GST certificate, etc.).

4. Submit the Application

  • Review your application and attached documents for accuracy.
  • Apply online through the bank’s website.

5. Verification Process

  • Bank Verification: The bank will review your application and conduct a verification process, which may include a phone call or video call for additional verification.
  • Document Verification: Some banks may require physical copies of the documents for verification. They might arrange for a pickup from your address or ask you to visit the nearest branch.

6. Account Activation

  • Once the verification is complete and your application is approved, the bank will activate your current account.
  • You will receive an account number, online banking details, and other relevant information either through email or via post.

7. Welcome Kit

  • A welcome kit containing your cheque book, debit card (if applicable), and other banking information will be dispatched to your registered address.

8. Initial Deposit

  • Some banks require an initial deposit to activate the account. Make sure to deposit the required amount if applicable.

9. Start Using Your Account

  • With the account activated, you can start using it for your business transactions. Set up internet banking, mobile banking, and any other services you need.

Documents required to open a Current Account

To open a current account with your bank, there are several essential documents that you will need to provide. Here is the list of documents you should be ready with:

  • PAN Card
  • Address Proof of the Company, Firm, HUF, etc (utility bill or rental agreement)
  • For companies and trusts, further documentation is necessary. A certificate of incorporation and a memorandum of association must be submitted. These legal documents establish the formation and structure of the organization, ensuring that it complies with regulatory guidelines.
  • ID and Address proof of all the directors
  • Certificate by tax authorities
  • Photograph of Director/Signatory
  • A cheque for opening up a bank account. 

Eligibility Criteria to open a Current Account 

The eligibility criteria for opening a current account in India can vary slightly from bank to bank, but there are common requirements that most financial institutions follow. Here's a general overview of the eligibility criteria:

1. Type of Entity

  • Individuals/Proprietors: Individuals or sole proprietors conducting a business or profession.
  • Partnerships: Registered partnership firms involved in business activities.
  • Companies: Private limited companies, public limited companies, or one-person companies registered under the Companies Act.
  • Trusts and Associations: Entities registered as trusts, societies, or associations engaged in non-profit activities.
  • Hindu Undivided Families (HUFs): HUF entities conducting a family business under a karta.

2. Age

  • The primary account holder or the proprietor must be at least 18 years old.

3. Documents Required

  • Proof of Identity: PAN card of the individual or entity, Aadhaar card, passport, voter ID, or driving license.
  • Proof of Address: Utility bills, lease or rent agreement, passport, or any government-issued address proof.
  • Business Proof: Registration certificate, license issued by the municipal authorities, GST registration certificate, or any other proof of business existence.
  • Partnership Firms: Partnership deed, PAN card of the firm, and identity and address proofs of partners.
  • Companies: Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA), PAN card of the company, and identity and address proofs of directors.
  • Trusts, Societies, and Associations: Registration certificate, PAN card of the entity, and identity and address proofs of trustees, members, or directors.

4. Initial Deposit

  • Banks require an initial deposit to open a current account, which varies depending on the bank and the type of current account.

5. KYC Compliance

  • All applicants must comply with the Know Your Customer (KYC) norms set by the bank, which involves verifying the identity and address of the account holders.

6. Good Standing

  • Applicants should not have a history of fraud or defaults with any financial institution.

Additional Considerations

  • Some banks may have specific criteria based on the business's annual turnover, the volume of transactions, or the nature of the business activities.
  • Non-resident Indians (NRIs) or persons of Indian origin (PIOs) may open current accounts with specific provisions and must comply with the Foreign Exchange Management Act (FEMA) regulations.

Before applying for a current account, it's advisable to check with the specific bank for their detailed eligibility criteria and ensure that you meet all the requirements to facilitate a smooth account opening process.


Best bank for current accounts in India with zero balance

As of the April 2023 update, several banks were known for offering zero-balance current accounts or accounts with minimal balance requirements, catering especially to startups, small businesses, and entrepreneurs. Some of the popular banks with zero balances are SBI Basic Current Account, ICICI New Start-Up Current Account, Axis Start-Up Current Account, Bank of Baroda etc. 

Can I open a zero-balance Current Account?

Banks like ICICI, Axis, and Bank of Baroda offer zero-balance current accounts. 

Is there any interest paid on Current Accounts?

Typically, current accounts do not earn interest. The primary purpose of a current account is to facilitate frequent and substantial transactions, including deposits, withdrawals, and transfers, which are essential for businesses, traders, and professionals.







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