Current Account

A current account is a type of deposit account for businessmen and individuals who carry out high number of financial transactions on a regular or daily basis. There is no limit to the number of transactions in a day on this type of transactional account. A current account is for the convenience of business as it is one of the most liquid type of bank accounts. It is not for the purpose of investment or savings. Banks usually do not pay an interest on the account balance. Current accounts allow the accountholder to make payments to creditors through cheque and other facilities.

In this post, we will talk about the features of current account, documents required to open the bank account, how to open a current account, its benefits and types, different access points, minimum average balance, and FAQs.

Features of Current Account

As understood, a current account is crucial and necessary for business. Banks provide a host of services and benefits on these accounts to match the requirements of a business. Below given are some of the features of current account.

  • The eligible account openers are individuals, trusts, associations, public and private companies, proprietary concerns, etc.
  • You need to follow all the applicable KYC guidelines in order to open a current account.
  • The primary objective of such an account is to make transactions easy and smooth for any business.
  • You can open just a single current account than multiple ones for a single business.
  • Though there is no interest earned on current accounts, nowadays, some of the banks offer interest rates on such accounts as well.
  • You can deposit cash in the account through cheque deposits, wire transfers from abroad, electronic transfers, or simply depositing cash at any of the bank branches.
  • You need to maintain a higher minimum balance in a current account against that for a savings account. Also, you can make transactions beyond that allowed on a savings account.
  • Penalty charges may apply on non-maintenance of the minimum balance.
  • You can take a short-term loan on the current account balance. The bank charges an interest on the loan.
  • You can make transactions such as cash, receive cheques, transfer funds, and a lot more.
  • There are no restrictions on the number of transactions that you can undertake in a day.

Documents Required to Open a Current Account

You need the following documents to open a current account:

NOTE: All the documents must comply with the KYC guidelines to open a current account.

  • Address proof and Identity proof of all the partners
  • PAN Card
  • Address proof of the Company/Firm/HUF
  • Companies need to submit address of communication
  • A colour photograph of the applicant/s
  • Cheque from an existing savings account
  • Trusts and companies have to provide Certificate of Incorporation and Memorandum of Association and Articles of Association (in case of Companies)

How to Open a Current Account in a Bank?

You can open a current account in any of the banks in India. All you have to do is visit the bank with required documents and the duly filled and signed application form. After the verification of documents, the bank will activate your Current Account. As an account holder, you must maintain a minimum quarterly average balance in the account. Usually, the criteria for minimum quarterly average balance is Rs. 5,000 to Rs. 10,000 or more.

Benefits of a Current Account

Below given are the benefits of a current account:

  • There are no limits on withdrawals.
  • The account helps with prompt transactions for a business.
  • There are no limits on deposits in the home branch.
  • There is a facility for overdrafts.
  • You can access mobile banking and internet banking.
  • You can make direct payments through Demand Drafts, cheques, or pay orders.

Types of Current Accounts

Banks may offer current accounts as per the need of your business. This is why you should know the nature of transaction to carry out before opening a specific current account. Below, we have mentioned some of the current accounts and their types:

1. Standard Current Accounts

Here, there is no interest offered on the deposit account. You need to maintain a minimum balance and the required monthly average balance. Some of the facilities include debit cards, cheque books, overdrafts, and a lot more. Some of the common features are SMS banking, free NEFT and RTGS transactions, internet banking, etc.

2. Packaged Current Accounts

These accounts offer a number of perks to the account holder. Some of the features to boast about are medical support, travel insurance, roadside assistance, and more.

3. Premium Current Accounts

This account provides exclusive benefits and offers. It comes with customized features suited specially to undertake high financial transactions.

4. Single Column Cash Book

Also known as Simple cash accounts, this current account allows daily transactions. But this account does not offer an overdraft facility. This bank account is beneficial to businesses that do not have any other bank account. Basically, a Single Column Cash Book records daily transaction under separate columns for credit and debit.

5. Foreign Currency Accounts

This current account is best for businesses or individuals who make frequent transactions in foreign currencies.

Different Access Points for a Current Account

You can access your current account using the following methods for daily cash transactions:

  1. Cheque: You can make cash withdrawal via cheques. It is one of the traditional ways over other popular methods such as the internet banking.
  2. Home Branch: You can drop into the nearest branch or the parent branch for different banking needs on your current account. These include deposits, withdrawals, financial assistances, and a lot more. After a certain free limit, a charge maybe applicable on deposits or withdrawals.
  3. Phone Banking: A majority of banks offer phone banking services to you. These services and activities are facilitated over calls. For instance, you can make payments, review transactions, cheque balance using this facility.
  4. ATM: You can draw cash from the nearest ATM machine. So, you do not have to specifically visit a branch for cash withdrawal. You can take out cash from an ATM during the normal banking hours. The withdrawal limits are however lower in case of that from an ATM.
  5. Online Banking: Through internet or online banking, you can access several banking activities such as clearing payments, cash transfers, view monthly statements and balances, etc. You can even use internet banking during non-banking hours. Thus, there is no need to wait in long queues or visit the bank to transfer cash from the account. But remember that there is a certain limit on online banking, after which, you need to carry out cheque transactions only.

Monthly Average Balance on Basic Current Accounts

Here is a list of some of the banks and their MAB or Monthly Average Balance requirements:

Bank MAB Deposit Limit (Free)
ICICI Bank Rs.25,000 12 times the MAB
HDFC Bank Rs.75,000 10 times the MAB
IndusInd Bank Rs.10,000 Up to Rs.2 lakhs
Axis Bank Rs.10,000 Up to Rs.2 lakhs
YES Bank Rs.1 lakh (quarterly) Up to 10 times of AMB
Canara Bank Rs.1 lakh (quarterly) Up to Rs.5 lakhs per day
Punjab National Bank Rs.1 lakh (quarterly) Up to Rs.2 lakhs per day

Frequently Asked Questions about Current Account

Here are the FAQs on Current Account:

This type of bank account is usually opened for businesses such as partnership firms, proprietors, trust, association of persons, public and private companies, and more that have a large number of daily transactions such as payments/receipts through banking.

This account allows businessmen to carry out business transactions smoothly and promptly. Subject to banking cash transaction, you can withdraw from the account without any limit.

  • Multi-location funds transfer, support from customer care executives, electronic funds transfer, etc.
  • Periodical email (yearly, quarterly, or monthly) or download of bank statements in different formats such as '.XLS', '.PDF', '.TXT’, etc.
  • Withdrawal and deposit of money (cash) at any location.

Sometimes you need to make several payments at a time, receipts, and other transactions like that of an entrepreneur or trader. So, what makes a current account different than a savings account? Below we have mentioned clear distinctions between the two.

  • A current account is for daily transactions, while a savings account is for deposit and limited transactions.
  • There is a facility of overdraft on current accounts, but this may not be so on a savings account. Overdraft or overdrawn is a facility wherein you get to take out cash more than what is there in your account.
  • The minimum balance requirement for a current account is higher in contrast to that for savings account.
  • Banks offer an interest up to 4% or 6% on savings account. But there is no interest offered on current accounts. Thus, a current account is a no interest-bearing deposit account.
  • A current account is best for entrepreneurs and traders who require a frequent access to their bank accounts. But a savings account is more appropriate for individuals, salaried employees, etc. who have a monthly income.

Current accounts help industrial progress of India. These allow businessmen to run financial transactions promptly on their business. The transactions are facilities through different modes such as mobile banking and internet banking. The creditors can get credit-worthiness detail of the account holder via inter-bank connection.

As an accountholder, you can make direct payments to creditors through Demand Drafts, Pay Orders, or Cheques. The bank can collect cash on behalf of you and credit it into your current account. There is also a short-term borrowing or overdraft facility.

Home branch of the parent branch is the location where you open the current account. There are no limits on cash deposits into a current account from its home branch. If the cash deposit is done from any other branch than the home branch, then a nominal charge is applicable.

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