What is a Current Account?
When setting up any new business, a bank account will be required to handle the flow of money and funds. Unlike savings accounts that are preferred by individuals, businesses require current accounts, because funds are accessed much more regularly, sometimes even daily.
A Current Account can be opened with most of the Commercial Banks. The account has no transactional limit, so one can withdraw cash as many times he/she prefers to. Usually, the minimum balance in a current account has a limit of Rs. 10,000 and above (some banks do offer an option of Zero Balance Current Account). But because of the flexibility of operations that these accounts offer, they don’t earn any interest.
If you are running an export business, your interaction with the bank will be even more frequent compared to other business types because of foreign exchange, lines of credit, bank guarantees and other miscellaneous requirements. So choosing a bank account for an exporter will definitely be a tasking job.
Types of Current Account
One can opt for a current account based on their business needs. Below are the 5 different types of current accounts provided by the majority of banks :
Basic Current Account
The account holds priority for customers who have bad credit ratings, be it younger population or people with pension schemes or even any other priority conditions. Basic current accounts have restricted features, where the account holder can’t avail of services such as checkbook or even be offered with an overdraft facility by the bank.
Standard Current Account
This is a basic deposit account, where the customer has to maintain a minimum monthly average balance. The account is a non-interest bearing account, where the customer has access only to basic facilities such as internet banking, overdraft facility, debit card etc.
Premium Current Account
This particular current account is best suited for those who carry out large financial transactions. The account provides exclusive offers and benefits to the account holder.
Packaged Current Account
The account is slightly better than the standard account and slightly inferior to the premium account. Nevertheless, the account does provide decent facilities to the account holder such as -- exclusive offers, benefits and customized features such as insurance, travel support, roadside assistance & more.
Foreign Currency Account
The account is for holder’s who are NRIs or individuals dealing with foreign currencies. If you have a business that has frequent foreign transactions, this is best suited for your business.
Note: The types of Current account may vary from bank to bank.
Advantages of Current Account
Execute more banking transactions compared to individuals with savings accounts
Transfer funds, receive cheques, make deposits and withdrawals more frequently
Make use of facilities such as Net Banking and Mobile Banking
Make international payments in different currencies
Involve the bank in your dealings with international customers, insurers, etc.
Overdraft facility is provided only to Current Account Holders
How to open a Current Account?
To apply for a current account, you can either visit a branch of your preferred bank or access their official website to apply online. These days, the application process can even be initiated through an SMS or a missed call to the bank, who will then call and assist you with the application.One can definitely opt for two or more current accounts, across various different financial institutions.
Here is a look at a physical current account application form from Punjab National Bank. Please note that different banks will require different individual details to be filled on their forms.
A typical procedure to open a current account contains information like name and contact details, address and identity proof-related information, business details, banking services required, nominee details, and owner/controlling person details (with their requisite identity and address proofs, too).
The information required is the same even when you apply online; however, the layout and flow will vary.
- *NOTE: Drip Capital is not affiliated to Punjab National Bank (PNB) in any way nor has this post been sponsored by PNB. PNB's current account form has been used in this article for illustrative purposes only. *
Documents required for opening a current account
You will have to furnish specific documents in order to open a current account in a bank. These documents will vary depending on your export business entity type, which could be a sole proprietorship, a partnership firm, a Limited Liability Partnership, a Private Limited Company, or a Public Limited Company, amongst others. Listed below are a few examples of documents that certain business entities need to provide when opening a current account:
Documents required for Sole Proprietorships
Address and Identity Proof: If you are a Sole Proprietor, you will have to attach your personal address and identity proof. Documents like your passport, voter ID, driving license, and Aadhaar can be used as identity proof as well as address proof.
Primary Proof: You will also have to produce a Registration Certificate (RC) for the proprietorship. This can be a Trade License, Labour License, Liquor License, Drug License, or any certificate issued by the government body in charge of that particular type of trade.
Secondary Proof: You will need to furnish secondary proof of identity such as Provident Fund/Employees’ State Insurance Corporation (PF/ESIC) registration certificate, utility bills, a certificate confirming the existence of your business by the Panchayat/Ward Commission, and so on.
Documents required for Partnership Firm
Address and Identity Proof: In the case of a Partnership, you will have to provide the company PAN and Partnership Registration Certificate, along with the firm’s address proof and your partner’s identity proof.
Primary Proof: You will have to produce your Partnership deed, in addition to the registration certificate (documents same as those mentioned for Sole Proprietorship).
Secondary Proof: You will need to furnish secondary proof of identity (documents that can be submitted are same as sole proprietorship)
Document required for LLPs
For LLPs the Banks ask for following documents:
Certificate of Incorporation.
LLPs have to furnish the firm’s PAN, LLP agreement, PAN, and identity proofs of all the partners.
Documents required for Companies
While opening a current account for Pvt Ltd or Ltd companies the Banks ask for the following documents:
A Certificate of Incorporation
Board Resolution for opening a Current Account
Memorandum and Articles of Association
A list of Directors and their Identity Proof
Company’s Address Proof
Permanent Account Number of the Entity
Similarly, the same procedure will be applicable to open a current account online, where the account holder will have to comply with the KYC norms and be charged with a nominal fee for the services.
Current Account Products for Exporters
While there are various types of current accounts, however, almost every major bank in India has current account products tailor-made specifically to address the needs of the Indian exporter.
Export-specific current accounts offer numerous features and products to customers, such as:
Exchange Earner’s Foreign Currency Account (EEFC) facility
Export bill collections
Free inward remittance
Free e-Bank Realization Certificate
Decreasing transaction charges on increasing forex turnover
Flexible products depending on volume of transactions and turnover
Issuing globally accepted lines of credit
Providing bank-to-bank document handling
Also Read: How To Find Your Market
Putting it all together
Once you have selected a particular current account product based on your requirements and the features offered, fill up the form or contact the bank for assistance with the form which includes advice on the required set of supporting documents. Bank representatives will also advise you on post-opening activities like netbanking, activating your ATM cards and other add-on features.
Once you’re done with this process, your current account is open and ready for business.
You may get an overdraft facility with your current account at a rate cheaper than loans.
Having a globally accepted and recognised banking partner can greatly benefit your business.
Enquire about the possibility of a sweep-in facility for your current account to maximise interest income on surplus funds.
Avoid multiple current accounts for the same business entity.
You may have to maintain a minimum balance to avoid low-balance penalty.
Avoid dishonouring cheques as this is a serious offence.
Keep a watch on how much surplus is parked in the current account, as it is a nil/low-interest bearing account.
Be careful while selecting add-on services as they might be paid services. For example, cheques may be chargeable beyond a certain number.
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