How to Open Current Account in India

In the world of banking, there are primarily two types of accounts that most people are familiar with: Savings Account (SA) and Current Account (CA). While most of us hold a Savings Account, a Current Account might be a new concept for some. This article aims to provide a comprehensive understanding of How to Open Current Account, its benefits, and its importance, especially for businesses.

What is a Current Account?

A Current Account is a type of bank account primarily used by businesses. Its design aims to facilitate numerous transactions during a single working day. Unlike a Savings Account, which is aimed at individual account holders for savings and investments, a Current Account serves the same purpose but is designed to promote businesses.

Features of a Current Account

A Current Account is essentially a deposit account held with a bank to manage your business transactions. If you own a business, a Current Account is the right account type to opt for. Here are some of its unique features:

Interest rate: Current Accounts do not earn any interest.
Minimum balance requirement: This varies from one bank to another.
Unlimited transactions: Current Accounts allow for unlimited daily transactions including fund transfers, cheque issuance, cash transactions, and more.
Online Banking Facility: This includes bank transfers (NEFT/RTGS/IMPS), account balance and statements, and bill payments with standing instructions like EMI or utility payments.
Overdraft facility: The bank provides an overdraft facility up to a set limit for emergency use.

Benefits of a Current Account

There are several benefits that make a Current Account uniquely advantageous to individuals and businesses:

Unlimited Transactions: Current Accounts allow for unlimited daily transactions, including fund transfers, cheque issuance, and cash transactions.
Overdraft Facility: The bank provides an overdraft facility up to a set limit for emergency use.
Online Banking Facility: This includes bank transfers (NEFT/RTGS/IMPS), account balance and statements, and bill payments with standing instructions.
High Security: Depositing cash in the bank significantly reduces security risks associated with handling large amounts of cash.
Business-friendly: Current Accounts are ideal for businesses that require a large number of transactions every day.
Easy to Operate: Current Accounts offer several convenient options to operate the account, including cash, cheque, ATM/Debit card, and digital banking.
Enhanced Business Credibility: Having a Current Account with a bank enhances a business’s credibility, which is crucial for transactions with suppliers and clients.
Alerts via SMS and Email: Account holders can receive updates about transactions and balances.

Current Account vs Savings Account

While both types of accounts serve different purposes, it’s important to understand their differences:

Meaning: A Savings Account is a deposit account with limited transactions, while a Current Account is meant for daily transactions.
Suitability: A Savings Account is suitable for salaried employees or those with a monthly income. Current Accounts are best for traders and entrepreneurs who need frequent access to their accounts.
Interest: Savings Accounts earn interest at around 4%, while Current Accounts do not earn any interest.
Overdrawing: Banks do not offer or allow overdraft facilities for Savings Accounts, but this facility is provided with a Current Account.
Minimum balance: The minimum balance required for a Savings Account is usually low, but it’s much higher for a Current Account.

How to Open Current Account

Opening a Current Account is a straightforward process, but it requires certain documents. Opening a Current Account requires certain documents to be submitted along with a signed application form. Here are the documents required:

Proof of Identity: This could be a PAN card, voter ID, passport, or driving license.
Proof of Address: This could be a telephone bill, electric bill, or any other valid address proof.
Proof of the Existence of the Business: This could be registration and licenses issued by the municipal authorities, GST registration certificate, a registration certificate issued by Professional Tax authorities, a business registration certificate issued by the respective State Government, RBI/SEBI registration certificate, licenses by FSSAI, or an import-export license issued by the Director General of Foreign Trade.
Proof of Address for Business: This could be a TAN allotment letter by the Income Tax, property registration documents, property tax/water tax bills, title deeds to the property/rental registration documents, or existing bank account statements.

Charges in Current Account

Current Accounts are subject to various charges depending on the bank’s policy. Here are some common types of charges associated with Current Accounts:

Minimum Balance Requirement: Banks often require a minimum balance to be maintained in the account. The amount varies from one bank to another.
Non-Maintenance Charges: If the account balance falls below the required minimum, banks may charge a non-maintenance fee.
Transaction Charges: Banks may charge for certain types of transactions, such as fund transfers, cheque issuance, and cash transactions.
Overdraft Costs: If the account offers an overdraft facility, there may be costs associated with using this service.
Cheque Bounce Charge: If a cheque issued by the account holder bounces due to insufficient funds, the bank may charge a fee.
Cash Deposit and Withdrawal Charges: Banks may charge for cash deposits and withdrawals that exceed a certain limit.
Other Service Charges: Banks may also charge for other services such as issuing a new cheque book, duplicate statements, and remittance services.

Please note that these charges can vary widely from one bank to another, and even between different types of Current Accounts within the same bank.

How to Choose the Right Bank for Current Account?

Choosing the right bank to Open Current Account for your business is a crucial decision. Here are some factors you should consider:

Business Needs: Understand your business needs. Do you make a lot of transactions? Do you need a line of credit? Do you need merchant services or specialized business banking services?
Fees: Be aware of the fees the bank charges. This includes monthly fees, transaction fees, and any additional charges that might apply to business accounts.
Relationship Building: Building a good relationship with your bank can be beneficial in the long run. It can help when you need a business loan or when you need to negotiate on fees.
Accessibility: Consider the bank’s accessibility. Is online banking important to you? Does the bank have enough branches and ATMs in your area?
Customer Service: Good customer service should be a priority. You want a bank that provides good customer service, especially since you’ll be dealing with them regularly for your business.
Products Offered: Look at the products and services the bank offers. This includes loans, lines of credit, and business credit cards.
Reputation: The bank’s reputation can also play a part in your decision. Look at reviews and ask around to find out about others’ experiences with the bank.

Remember, what works for one business might not work for another. It’s important to do your research and choose a bank that fits your business needs.

The Bottom Line

In conclusion, a Current Account is an essential banking tool for businesses. It offers numerous benefits such as high security, business-friendly features, overdraft facility, and ease of operation. Whether you’re a budding entrepreneur or an established business owner, a Current Account can help streamline your financial transactions and contribute to the smooth operation of your business. Remember, it’s important to choose a bank that offers a Current Account with features that align with your business needs. Happy banking!