Meaning of Current Bank Account
Current bank account is opened by businessmen who have a higher number of regular transactions with the bank. It includes deposits, withdrawals, and contra transactions. It is also known as Demand Deposit Account.
In India, current account can be opened by depositing Rs.5000 (approx. US $ 100) to Rs. 25,000 (approx. US $ 500). The customers are allowed to withdraw the amount with cheques, and they usually do not get any interest. Generally, current account holders do not get any interest on their balance lying in current account with the bank.
Current account holder get one important advantage of overdraft facility.
Features of Current Bank Account ↓
The main features of current account are as follows:-
- Current bank accounts are operated to run a business.
- It is a non-interest bearing bank account.
- It needs a higher minimum balance to be maintained as compared to the savings account.
- Penalty is charged if minimum balance is not maintained in the current account.
- It charges interest on the short-term funds borrowed from the bank.
- It is of a continuing nature as there is no fixed period to hold a current account.
- It does not promote saving habits with its account holders.
- Banker requires KYC (Know your Customers) norms to be completed before opening a current account.
- The main objective of current bank account is to enable the businessmen to conduct their business transactions smoothly.
- There is no restriction on the number and amount of deposits.
- There is also no restriction on the number and amount of withdrawals made, as long as the current account holder has funds in his bank account.
- Generally, bank does not pay any interest on current account. Nowadays, some banks do pay interest on current accounts.
Advantage of Current Bank Account ↓
The advantages of current account are as follows:-
- Current account is mainly opened for businessmen such as proprietors, partnership firms, public and private companies, trust, association of persons, etc. that has a large number of daily banking transactions, i.e. receipts and/or payments.
- It enables businessmen to carry out their business transactions properly and promptly.
- The businessmen can withdraw from their current accounts without any limit, subject to banking cash transaction tax, if any levied by the government.
- Home branch is that location where one opens his bank account. There are no restrictions on deposits made in the current account opened in a home branch of a bank. However, the current account holder can deposit the cash from any other branch of a bank other than the home branch by paying a nominal charge as applicable.
- It helps businessmen to make a direct payment to their creditors by issuing cheques, demand-drafts or pay-orders, etc.
- It enables a bank to collect money on behalf of its customers and credits the same in their customers' current accounts.
- It enables the current account holder to obtain overdraft (short-term borrowing) facility.
- The creditors of the account holder can get credit-worthiness information of the account holder through inter-bank connection.
- It facilitates the industrial progress of the country. Without its help, businessmen would face difficulties in running their businesses.
- It has the facilities of Internet-banking and mobile-banking to carry out important business transactions with ease and quickly.
- It also provides various other advantages (benefits) such as:
- Deposit and withdrawal of money (cash) at any location.
- Multi-location funds transfer,
- Electronic funds transfer.
The following documents are to be submitted with the completed and duly signed Account Opening Form:
- Proof of identity – PAN card, voter ID card, passport, driving license
Proof of address – Latest telephone bill or electricity bill
- Certificate of Incorporation and Commencement of Business
- Memorandum and Articles of Association
- Board resolution authorising the opening and operation of the account
- PAN or General Index Registrar (GIR) number or completed Form 60
- List of Directors with residential addresses
- Partnership Deed and Registration Certificate
- Shop and Establishment Certificate
- Letter from partners approving the persons concerned to open and operate the account
- Certificate from a State Government or Statutory Body or Trade License or Sales Tax Certificate or Shop and Establishment Certificate
- Letter of proprietorship, duly signed by the proprietor in his or her individual capacity (with a rubber stamp)
- For Hindu Undivided Family (HUF):
- Letter of HUF duly signed by Karta and all Co-Parceners
- PAN or GIR number or completed Form 60
- Names of Karta and Co-Parceners with residential address
- Latest passport-size photographs of all the authorised signatories
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- Copy of the trust deed
- Copy of the registration certificate
- Copy of the resolution by the trustees authorising the members concerned to open and operate the account
- List of trustees with residential addresses
- Photographs of the members operating the account associations or clubs
- Bye-laws of the association or club
- Certificate of Registration
- Copy of the resolution by the Board authorising the members concerned to open and operate the account
- Photographs of the members operating the account.
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