Features of Current Account
1. Unlimited Transactions: Current accounts allow an unlimited number of deposits and withdrawals, making them suitable for businesses with high transaction volumes.
2. Overdraft Facility: Many current accounts come with an overdraft facility, which allows account holders to withdraw funds beyond their available balance, up to a predetermined limit. This feature can provide liquidity during cash flow shortages, subject to applicable fees and interest charges.
3. Cheque Book: Account holders typically receive a cheque book, enabling them to make payments conveniently and securely. Cheques serve as a reliable payment method for various transactions.
4. Debit Card: A debit card is issued with a current account, allowing account holders to withdraw cash from ATMs, make online purchases, and conduct other electronic transactions.
5. Online Banking: Current accounts often offer online banking facilities, enabling account holders to manage their accounts, transfer funds, and access account statements electronically.
6. Interest Rates: While current accounts are primarily designed for transaction purposes, some banks may offer nominal interest rates on the account balance.
7. Complementary Services: Banks may provide additional services to current account holders, such as loan facilities, trade finance solutions, and other value-added services tailored to business needs.
8. Minimum Balance Requirement: Most current accounts require account holders to maintain a minimum average balance, which can vary depending on the bank’s policies.
Types of Current Account
1. Regular Current Account: This is the most basic type of current account offered to individuals and small businesses. It facilitates daily banking transactions such as deposits, withdrawals, and fund transfers. These accounts typically do not earn interest on the balance maintained.
2. Premium Current Account: Many banks offer premium current accounts to high-net-worth individuals and businesses with higher minimum balance requirements. These accounts often come with additional benefits, such as higher transaction limits, preferential interest rates on loans, and exclusive banking services.
3. Corporate Current Account: These accounts are specifically designed for companies and larger businesses. They offer features like higher transaction limits, cash management services, and dedicated relationship managers to cater to the complex financial needs of corporate entities.
4. Non-Resident Current Account: This type of account is offered to individuals and businesses who are not residents of the country where the bank is located. It allows them to conduct transactions and manage their funds while living or operating outside the country.
5. Trust Current Account: These accounts are opened by trustees for managing funds held in trust. They provide a convenient way to keep trust funds separate from personal or business accounts and facilitate transactions related to the trust.
6. Partnership Current Account: As the name suggests, these accounts are designed for partnerships and firms. They enable partners to jointly operate the account and manage the financial transactions of their business.
7. Overdraft Current Account: Some banks offer current accounts with an overdraft facility, which allows account holders to withdraw funds beyond their available balance, up to a predetermined limit. This feature can provide financial flexibility, but interest is charged on the overdrawn amount.
Benefits of a Current Account
- A current account offers several key advantages for individuals and businesses alike. One of the primary benefits is liquidity and easy access to your funds. With a current account, you can quickly withdraw cash, write checks, or make electronic transfers whenever needed for your daily financial requirements.
- Another significant advantage is the ability to earn interest on your balance, albeit typically at lower rates compared to savings accounts. While the interest may be modest, it still allows your money to grow gradually while remaining readily accessible.
- Current accounts also facilitate seamless money management by providing various banking services under one umbrella. These may include online banking, mobile banking apps, debit cards, overdraft facilities, and even offers on loans or other financial products from the same bank.
- For businesses, a current account streamlines operations by allowing for efficient collection of payments from customers and disbursement of funds to vendors, suppliers, and employees. It simplifies cash flow management and record-keeping, which is crucial for maintaining financial discipline and regulatory compliance.
- Current accounts often come with additional features like free cash deposits, free account statements, and lower fees for certain banking services, making them a cost-effective banking solution, especially for businesses with frequent transactions.
Who can open Current Account?
1. Individuals: Any legally competent individual, irrespective of their occupation or profession, can open a current account with a bank. The account holder needs to provide valid identity proof, address proof, and other necessary documents as per the bank’s know-your-customer (KYC) norms.
2. Businesses: Sole proprietorships, partnerships, limited liability partnerships (LLPs), private limited companies, and public limited companies can open current accounts for their business operations. The bank may require documents such as registration certificates, partnership deeds, memorandum and articles of association, and other relevant documents depending on the type of business entity.
3. Non-profit organizations: Trusts, societies, clubs, associations, and other non-profit organizations can open current accounts for their operational needs. They need to provide registration certificates, trust deeds, bylaws, and other relevant documents as per the bank’s requirements.
4. Government entities: Central and state government departments, public sector undertakings (PSUs), and other government bodies can open current accounts for their official transactions and operations.
Charges on Current Account
1. Account Maintenance Fees: Most banks charge a monthly or quarterly account maintenance fee for current accounts. This fee covers the cost of maintaining and operating the account.
2. Cash Handling Charges: Banks may levy charges for cash deposits and withdrawals beyond a certain limit. These charges are usually calculated as a percentage of the total cash transaction amount.
3. Cheque Book Issuance Charges: Banks typically charge a fee for issuing a new cheque book or for reissuing a cheque book upon request.
4. Demand Draft/Pay Order Charges: If you need to issue a demand draft or pay order, banks charge a fixed fee for the service.
5. Stop Payment Charges: If you need to stop payment on a cheque, banks charge a fee for processing the stop payment request.
6. Returned Cheque Charges: Banks impose charges on customers for cheques that are returned due to insufficient funds or other reasons.
7. Outstation Cheque Collection Charges: If you deposit a cheque drawn on a bank located in another city or state, banks may charge a fee for collecting the funds from the other bank.
8. Account Statement Charges: While most banks provide a certain number of free account statements, they may charge a fee for additional statements or duplicate statements.
9. Online Transaction Charges: Some banks may charge fees for online transactions, such as fund transfers, bill payments, or other online banking services.
Use of Current Account
- A current account is a versatile banking product that is primarily used by businesses, sole proprietors, and other commercial entities for their day-to-day financial transactions. The primary use of a current account is to facilitate the smooth flow of funds in and out of the account, enabling the account holder to manage their liquidity effectively.
- One of the main uses of a current account is for receiving payments from customers or clients. Businesses can provide their current account details to their customers, who can then deposit funds directly into the account as payment for goods or services rendered. This streamlines the payment collection process and ensures that the funds are readily available for the business to use.
- Another significant use of a current account is for making payments to suppliers, vendors, or other business partners. Account holders can issue checks or initiate electronic fund transfers from their current account to settle invoices, pay utility bills, or make other necessary payments. This convenience eliminates the need to maintain large cash reserves and ensures timely payment to creditors.
- Current accounts also play a crucial role in payroll management. Businesses can use their current account to transfer salaries and wages directly into the accounts of their employees, streamlining the payroll process and ensuring accurate and timely compensation.
- Current accounts are often used for short-term borrowing purposes. Many banks offer overdraft facilities or cash credit limits associated with current accounts, allowing businesses to access additional funds when needed to cover temporary cash flow shortages or take advantage of business opportunities.
Monthly Average Balance Requirement for Current Account
Most banks require current account holders to maintain a minimum monthly average balance (MAB) in their accounts. The MAB requirement helps banks cover the operational costs associated with maintaining current accounts, which typically offer various services and facilities to account holders.
The monthly average balance requirement can vary depending on the bank and the type of current account. Generally, banks offer different current account variants, such as regular, premium, or corporate accounts, with varying MAB requirements.
Here are some common points regarding the monthly average balance requirement for current accounts:
1. Minimum Balance: Banks specify a minimum balance that must be maintained in the current account at all times. Failure to maintain this minimum balance may result in penalty charges or account suspension.
2. Average Balance Calculation: The monthly average balance is calculated by adding up the daily closing balances in the account for the month and dividing it by the number of days in that month.
3. Penalty Charges: If the monthly average balance falls below the required level, banks typically levy a penalty charge or service fee for that month. The penalty amount can vary from bank to bank and may depend on the extent of the shortfall.
4. Exemptions: Some banks may offer exemptions or relaxations on the monthly average balance requirement for certain categories of customers, such as senior citizens, students, or corporate entities with substantial business relationships.
5. Review and Revision: Banks periodically review and revise their monthly average balance requirements based on factors like operational costs, market conditions, and competitive positioning.
Documents required to open a Current Account
1. Identity Proof: A government-issued identity document such as a passport, driver’s license, Aadhaar card, or voter ID card is required to verify the account holder’s identity.
2. Address Proof: Documents like a recent utility bill (electricity, water, or telephone), bank statement, rental agreement, or government-issued document with the current address are necessary to establish the account holder’s residential address.
3. Photographs: Most banks require one or two recent passport-size photographs of the account holder(s) for their records.
4. Initial Deposit: Banks may require a minimum initial deposit amount, which can vary based on the type of current account and the bank’s policies.
5. PAN Card: A Permanent Account Number (PAN) card issued by the Income Tax Department is generally required for opening a current account.
6. Incorporation Documents (for Businesses): If the account holder is a business entity, banks typically require incorporation documents such as the Certificate of Incorporation, Memorandum and Articles of Association, and a resolution from the board of directors authorizing the opening of the account and authorizing signatories.
7. Partnership Deed (for Partnership Firms): In the case of a partnership firm, the partnership deed outlining the details of the partners and their profit-sharing ratios is usually required.
8. Other Documents: Depending on the bank’s policies and the account holder’s specific circumstances, additional documents such as a canceled cheque leaf, proof of business activity, or other relevant documents may be requested.
How to open Current Account – Offline & Online?
Offline Method (Visiting a Bank Branch):
1. Gather the Required Documents: To open a current account offline, you will need to gather the necessary documents, which typically include proof of identity (such as a government-issued ID or passport), proof of address (utility bills, rent agreement, etc.), and any other documents specified by the bank.
2. Visit the Nearest Bank Branch: Once you have all the required documents, visit the nearest branch of the bank where you wish to open the account. You can locate the nearest branch using the bank’s website or by calling their customer service.
3. Fill Out the Account Opening Form: At the bank branch, you will be provided with an account opening form. Fill out the form accurately with your personal and business details, as well as the type of current account you wish to open (individual, sole proprietorship, partnership, or company).
4. Submit the Documents: Along with the completed account opening form, submit the required documents to the bank personnel for verification.
5. Initial Deposit: Most banks require an initial deposit amount to open a current account. Be prepared to make the initial deposit as per the bank’s requirements.
6. Receive Account Details: Once the account is successfully opened, the bank will provide you with the account details, such as the account number, checkbook (if applicable), and other relevant information.
Online Method (Using Bank’s Website or Mobile App):
1. Visit the Bank’s Website or Mobile App: Log in to the bank’s official website or mobile app and navigate to the account opening section.
2. Choose the Account Type: Select the option to open a current account and provide the necessary details about your business or individual requirements.
3. Upload Required Documents: You will be prompted to upload scanned copies or digital versions of the required documents, such as proof of identity, proof of address, and any other relevant documents.
4. Fill Out the Online Form: Complete the online account opening form with accurate personal and business details, as well as the type of current account you wish to open.
5. Make the Initial Deposit: Some banks may require you to make an initial deposit online using net banking, debit card, or other available payment options.
6. E-Verification and Approval: The bank will verify your submitted documents and information electronically. Once approved, you will receive the account details via email or through the bank’s online portal.