Widely, businesses that conduct a high volume of daily money transfers open current bank accounts. Deposits, withdrawals, and contra transactions are all included under this account. Sometimes, people also call it a Demand Deposit Account.
Businesses can open current accounts at both cooperative and commercial banks, and they get a feature of depositing and withdrawing money at any time, 24/7. It is also ideal for sending cheque payments to creditors, and businesses can deposit the customer's checks to collect funds.
Initially, every firm must open an account by depositing anywhere between INR 5000 to INR 25000. However, it varies from bank to bank. Businesses follow a cheque system to withdraw money but do not get any interest.
So, what is a current bank account? Here is everything you need to know about it.
The following are the main characteristics of a current account:
1. It is a bank account that does not pay interest.
2. It requires a higher minimum balance to be maintained compared to the savings account.
3. A minimum amount is mandatory, without which the account bearer must pay charges or penalties.
4. It charges interest on short-term loans from the bank.
5. It is ongoing because there is no set period for keeping a current account.
6. It does not encourage account holders to save.
7. Before opening a bank account, the banker must follow the KYC (Know Your Customer) procedures.
8. The primary goal of this bank account is to allow entrepreneurs to conduct their transactions smoothly.
For business owners, there are several advantages to having a current account:
1. Businesses can withdraw money any time they need to meet their daily needs.
2. A current account owner can deposit cash or checks at any bank's branches, making it extremely easy to receive money from small customers.
3. Obtaining an overdraft facility against a current account is easy. An outstanding balance helps the business meet its working capital needs at any time.
4. Customized Current account types are available based on the type of entity, business, and account holder. For instance, HDFC and ICICI Banks offer different forms of current accounts for trusts, societies, associations, clubs, and others, with a free cash deposit of up to Rs. 50 lakh per month.
You should be familiar with your needs before opening a current account. Based on your business needs, your current account is of 5 types, including:
A standard account is a no-interest account with a minimum and monthly average balance requirement. Some advantages are free RTGS or NEFT money transfers, SMS banking, online banking, and others, while checkbooks, debit cards, an overdraft facility, and other services are also available.
Accountholders of packaged accounts receive a variety of advantages. It includes services like roadside assistance, medical care, and travel insurance.
As the name implies, it is a cashbook that records daily transactions in different columns for debit and credit. It is suitable for businesses that do not have bank account maintenance. These accounts allow daily transactions but lack features such as an overdraft facility.
Premium members receive special discounts and benefits. The account provides customized options and is typically suitable for people who engage in significant financial activities.
A foreign currency account is the best alternative for individuals or businesses who frequently transact in foreign currencies.
You or your customers can deposit cash into your firm's current account in the following ways:
1. Cheque deposits
2. Electronic transfers
3. Wire transfer from abroad
4. Depositing cash at any of the branches of your bank
You need to have the following documents to open a current bank account:
1. PAN card
2. Address proof
3. Partnership agreement (in the case of partnership firms)
4. ID and residence proof of all partners
5. A color photograph of the applicant(s)
6. Cheque from existing savings account for account opening
7. Companies should provide the address of the communication
8. Companies or trusts must submit a certificate of incorporation and memorandum of association
Note: Ensure that the KYC documents you submit are valid to enjoy smooth transactions without interruptions.
For the most part, current account interest rates are zero. However, some provide interest rates.
Top banks such as ICICI, HDFC, SBI, Axis Bank, and Bank of Baroda can provide lucrative current account deals.
You can open a current account both in person and online. To avail online mode of applying, go to the bank's official website to finish the application process.
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