Planning on opening a current account? Here's what you need to know
Posted: Dec 02, 2019
If you are running a business or are a working professional, opening a current account comes handy in day to day operations. Unlike a savings account that can be used by individuals for personal purposes, a current account is generally opened for the sole purpose of managing a business. It is associated with huge transactions on a regular basis. A current account does not offer any interest, but it does offer the option to keep zero balance. Because a current account offers other benefits like an unlimited number of withdrawals, easy access to liquid cash, overdraft facilities etc. There are no restrictions on cash deposits or cash withdrawals when you open a current account.
Advantages of opening a current account
Customers can make unlimited withdrawals (there is a fee involved) - this is a huge advantage as day to day business operations need to have smooth cash flow, a feature offered exclusively by current accounts.
Customers can make any number of deposits at the home branch of a current account. At a minimal fee, they can make cash or cheque deposits even at other branches.
Businesses can use cheques, cash or even demand draft facility to make direct payments to their associates.
While opening a current account might have its advantages, you should also consider its heavy transaction fees, excessive paperwork and loss of opportunity to gain interest.
Most financial experts will agree that business still has an advantage on opening current accounts as they help with making daily operations flow smoothly, thereby not only helping the business but also the industry and economy.
Who can open a current account?
Most banks offer current account opening facilities to the following types of individuals or businesses -
In a nutshell, a resident individual is someone who is a domiciled citizen of a state in a taxable year.
A Hindu Undivided Family is eligible to apply for opening a current account provided they submit all relevant documents pertaining to all members of the HUF.
Sole Proprietary firms
Sole proprietary firms are businesses that are owned by a single individual.
Partnership firms and Private companies
These are firms owned by a small group of two to three individuals that partner together for profit.
Public Limited Companies
A public limited company is one that has limited liability and is funded by people through shares.
How does one open a current account?
Opening a current account is as easy as opening a savings account. The only hitch is that your paperwork needs to be as per the bank’s prescriptions. Most banks ask for the following documents to open a current account.
- Proof of the existence of the business
- Proof of address of the business
- KYC of the proprietor
- Tax registration documents
- Licences from relevant authorities.
These documents determine a business or professional’s eligibility for opening a current account.
If an individual or business meeting with the bank’s eligibility criteria and submit the correct documents, they can easily open a current account at any bank offering current account facilities.
Savings account are the most conventional methods of saving money, and they have been around for a long time.