When it comes to managing your business finances efficiently, opening a current account is the best choice. Designed for businesses, a current account provides the convenience of handling high-volume transactions seamlessly. To open this account, meeting certain eligibility criteria is essential.

This ensures that the account serves its purpose and aligns with your business needs. Explore key eligibility criteria for a smooth and hassle-free current account opening process for your business.

What is a Current Account?

A current account is a business-focused bank account designed for daily financial activities. Widely utilised by businesses, these accounts cater to the specific needs of entrepreneurs and corporations. As finances have embraced digitization, current accounts now come in digital forms, offering enhanced convenience.

Opening a current account can now be done from the comfort of your business space. What sets it apart is the array of features tailored for businesses, including integrated vendor payments, payroll management, corporate credit cards, and more. All these features are accessible through a single account. With the recent surge in digital-only bank accounts, managing your business finances has become simpler than ever.

Why should you open a Current Account?

Opening a current account offers several compelling advantages for business owners, including:

• Convenient banking: Current accounts streamline business transactions, allowing quick payments, deposits, withdrawals, and balance checks without transaction limits.
• Business growth: Tailored to meet business needs, current accounts facilitate financial management, supplier and employee payments, and customer transactions.
• Separate accounts: Maintaining distinct personal and business finances avoids confusion during tax filing, accounting, and daily operations.
• Overdraft facility: Access funds beyond your balance temporarily, aiding in working capital needs or cash flow emergencies, potentially interest-free.
• Cheque leaves: Enjoy a monthly refresh of cheque leaves, ensuring uninterrupted transaction capabilities.
• Limitless transactions: Conduct an unlimited number of transactions monthly, accommodating business growth seamlessly.
• Credit building: Demonstrate financial credibility and improve credit score through consistent transaction records.
• Financial planning: Obtain clear transaction records for informed business analysis and future planning, facilitating sustainable growth strategies.

Types of Current Account 

Types of current accounts cater to various business needs: 

• Regular current account: Basic account with no interest on balance and minimum balance requirements.
• Start-up current account: Tailored for new businesses, offering flexibility with minimum balance requirements.
• Global trade current account: Ideal for businesses dealing in foreign currencies, facilitating hassle-free global transactions.
• RERA current account: Mandatory for real estate companies to protect property buyers, with strict withdrawal regulations.
• Merchant current account: Offers a suite of benefits including free cash deposits, NEFT/RTGS services, and overdraft facility.
• ActivMoney current account: Maximises financial efficiency with automatic FD sweeps and potential returns of up to 7% interest.

Who is eligible to open a Current Account?

Eligibility to open a current account extends to various entities and individuals, including:

• Non-government organisations or charitable trusts
• Related parties
• Stock and share brokers
• Mutual funds/insurance companies
• Foreign banks
• Domestic banks/domestic co-operative banks/regional rural banks
• Public sector undertakings
• Religious organisations/government bodies/educational institutes
• Private limited companies
• Partnership/limited liability partnerships
• HUFs (Hindu undivided families)
• Sole proprietorships
• Individuals
• Co-operative society/Society/Trust

These entities and individuals meet the criteria to open a current account for their financial transactions.

Documents required to open a Current Account

To open a current account, you need specific documents that verify your business activities. These are the Current Account documents required:

• Business proof: Provide documents showcasing your business's activities. This can be a licence or certificate issued by municipal authorities under the Shop & Establishment Act.
• CIN (Company Identification Number): Include your company's CIN for proper identification.
• GST/VAT/CST certificate: Present the relevant certificate for Goods and Services Tax (GST) or Value Added Tax (VAT) or Central Sales Tax (CST).
• Service tax/Sales tax documents: Include registration or certificate documents issued by the service tax or sales tax authorities.
• Importer Exporter Code (IEC): If applicable, furnish the IEC for your business. 
• Income Tax Return (ITR): Provide a complete ITR in the proprietor's name displaying the entity's income.
• Licence/Certificate of Registration: Include any licence or certificate of registration as per the government's Statute or Act.
• TAN Allotment Letter: If applicable, submit the TAN allotment letter issued by the NSDL in the firm's name.
• Utility Bills: Include recent utility bills like landline, water, and electricity bills for address verification.

Process to open a Current Account

Opening a Current Account is a straightforward process. Here's how you can get started:

• Visit the bank's Business/Current Account section and click on the "Apply Now".
• Fill out the online application form with the details of your business.
• Upload the required Know Your Customer (KYC) documents, such as Aadhar card, PAN card, and proof of address.
• Review and submit your application.
• Alternatively, you can visit the nearest bank branch.
• Collect and fill out the form for opening a Current Account.
• Submit the completed form along with your KYC documents to the bank representative.
• Await approval and confirmation of your new current account.

By following these simple steps, you can open a current account hassle-free and start managing your business finances efficiently.

Conclusion 

A current account is important for efficiently handling large transactions and significant business payments. Before getting into the banking world, ensure you meet eligibility criteria such as business registration documents, KYC compliance, and a satisfactory credit history.

Selecting the right bank is significant, so take time to research and find one that aligns with your business needs. Kotak, for instance, offers a hassle-free online application process for current accounts. Remember, a well-chosen current account can be a powerful asset to manage your finances and grow. 

FAQs 

1. What documents do I need to open a current account?

You typically need business registration documents, KYC (Know Your Customer) details, proof of address, and identity documents for all authorised signatories.

2. Is there a minimum balance requirement for a current account?

Yes, most banks require a minimum balance to be maintained in a current account. The amount varies depending on the bank and type of account.

3. Can I open a current account as a sole proprietor?

Yes, sole proprietors can open a current account by providing their business registration documents, KYC details, and proof of identity and address. 

4. Do I need a good credit history to open a current account? 

While some banks may consider your credit history, it's not always a strict requirement. However, a positive credit history can enhance your chances of approval.

5. Are there any restrictions on transactions in a current account?

Generally, there are no limits on the number or value of transactions in a current account. However, some banks may impose certain restrictions or charges for high-volume transactions.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.