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. Current Accounts usually don’t have any limit on how many transactions can be made. Because of the flexibility of operations that these accounts offer, they don’t earn any interest.
As the entrepreneur of 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.
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
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.
Here is a look at a physical application form from Punjab National Bank*. Please note that different banks will require different individual details to be filled on their forms.
A typical current account opening form contains fields for 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.
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:
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.
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)
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.
For Pvt Ltd Company/ Public Ltd Company 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
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
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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.