Individuals and companies that conduct regular business transactions rely on current accounts as an essential financial resource. Current accounts are tailored to meet business requirements, providing benefits like increased transaction limits, digital banking solutions, overdraft options, and seamless payments and collections. Below is an overview of the advantages of a current account and all the essential information you should be aware of regarding them.
What is a Current Account?
A current account is a bank account created for individuals and businesses to meet the financial requirements of their business. Current accounts focus on providing access to funds and flexibility for managing transactions. This makes them well suited for businesses and professionals requiring regular deposits and withdrawals.
Current accounts are structured to accommodate the volume of transactions for business operations. They support a number of transactions which are essential for operational efficiency.
Benefits of Current Accounts
Current accounts offer benefits that address the distinct requirements of businesses. Here are some key advantages of current accounts:
- Multiple Transactions allowed: Current accounts allow multiple transactions making them ideal for businesses with fund movements on a regular basis.
- 2. Overdraft Facility: Many banks provide an overdraft option with current accounts, giving businesses short-term credit to effectively manage their cash flow.
- 3. Access from Multiple Locations: Current accounts allow operation from all branches of your bank making it convenient to access funds from different places.
- 4. Cheque Book Availability: Account holders receive cheque books for payments and money transfers.
- Online Banking: Current accounts offer online banking facilities through various digital platforms, mobile applications allowing businesses to handle their financial matters efficiently.
- Additional Services: Depending on the account type businesses can avail benefit in services like demand drafts, pay orders, export/import services, merchant solutions like POS and QR, and trade services.
Minimum Monthly Average Balance (MAB)
Maintaining a current account requires maintenance of minimum Monthly Average Balance (MAB) requirement. MAB is calculated by adding up the closing balance of each day of the month and then dividing the total by the number of days in that month. This practice ensures that account holders keep a balance to avoid charges and benefit from the advantages linked to their account type.
Types of Current Accounts
Banks provide a variety of current account options tailored to meet different business requirements. Each type comes with its features, advantages and prerequisites. Here are a few common types of accounts:
| Types of Current Account | Description |
| Premium Banking | |
| Business 360 Banking | A comprehensive account designed for businesses with extensive transaction requirements, offering a range of advanced features and benefits. |
| Wealth Management Current Account | Tailored for high-net-worth individuals, providing specialised banking services and wealth management solutions. |
| Private Banking Current Account | Offers personalised banking services for ultra-high-net-worth clients, with exclusive benefits and premium features. |
| Everyday Banking | |
| Smart Business Current Account | Ideal for businesses with regular transaction needs, offering standard features with the flexibility of digital banking. |
| RCA (Roaming Current Account) | A standard current account suitable for businesses with basic banking needs, providing essential transaction facilities. |
| Special Banking | |
| Escrow Current Account | A specialised account for managing funds in escrow, ensuring secure and transparent transactions. |
| RERA Current Account | Tailored for real estate businesses, meeting regulatory requirements under the Real Estate (Regulation and Development) Act. |
| EEFC (Exchange Earners’ Foreign Currency) Current Account | Enables businesses to hold and transact in foreign currency, ideal for exporters and those dealing in international trade. |
| GEM Current Account | Designed for businesses with growing transaction activity, offering enhanced features and services to support business expansion. |
Difference between Current Account and Savings Account
The following table represents the difference between a current account and savings account:
| Features | Current Account | Savings Account |
| Purpose | For frequent transactions by businesses or individuals. | For saving money with limited transactions. |
| Interest | Generally does not earn interest. | Earns interest on the deposited amount. |
| Minimum Balance | Usually requires a higher minimum balance. | Lower minimum balance requirement. |
| Fees | fees based on business facilities offered and use | Fees based on savings use |
How to Open a Current Account?
The following table represents the difference between a current account and savings account:
Online
1. Go to the bank’s website. Move to the business or current account section.
2. Complete the application form with your name, contact details and business information.
3. Select the type of current account that best fits your business requirements.
4. Verify your number. Finalise the application process.
5. Verify your number. Finalise the application process. A bank representative will get in touch with you for further verification.
Offline
1. Visit the bank branch in person.
2. Fill out the provided current account opening form provided by the bank.
3. Submit required KYC documents along with photographs.
4. Select the type of current account you would like to open.
5. Complete all the formalities. Submit your application for processing.
Required Documents for Opening a Current Account
The documents needed to open an account vary depending on the type of business entity. However, some standard documents include:
- For Individuals: PAN Card, Aadhaar Card, business proof and an account opening cheque.
- For Proprietors: Proprietor’s PAN Card, KYC documents of the proprietor, Government Issued Registration Certificate of the firm, FATCA declaration and an account opening cheque.
- For Company and LLP: PAN Card of the entity, Constitution documents of the Firm, KYC documents of the authorised signatories and beneficiaries, PAN Card of the owner, ID proof and address proof, Board Resolution/LLP Letter, FATCA declaration and an account opening cheque.
- For Partnership Current Account: PAN Card of the entity, Constitution documents of the Firm, KYC documents of the partners/ beneficial owners such as PAN Card, ID proof and address proof, Partnership letter, FATCA declaration and an account opening cheque.
Managing Your Current Account
Managing your account is essential for ensuring smooth business operations. Here are some helpful tips;
- Maintain the Minimum Balance: Keep a minimum balance to avoid penalties and enjoy account benefits.
- Monitor Transactions: Regularly review your account statements to track transactions and identify any discrepancies.
- Use Online Banking Services: Use online banking services to handle your account transfer funds and pay bills efficiently.
- Utilise Overdraft Facility Wisely: Use the overdraft facility to manage short-term cash flow needs without disrupting business operations.
- Stay Informed: Stay updated on the bank’s policies and fees related to your account to prevent unexpected expenses.
Conclusion
Businesses and professionals rely on current accounts for regular access to their money. It’s important to grasp the types of current accounts, their advantages, and how to handle them effectively to ensure that your business runs smoothly. Whether you’re a business proprietor or part of a corporation, having a current account offers the versatility and functionalities essential for efficient financial management. Explore this resource to ensure your business transactions flow seamlessly.