Current Account

What is Current Bank Account ? Its Features and Advantages

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.

Current account can be opened in co-operative bank and commercial bank. In current account, amount can be deposited and withdrawn at any time without giving any notice. It is also suitable for making payments to creditors by using cheques. Cheques received from customers can be deposited in this account for collection.

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.

Open Saving Account

  1. Approach any Bank of choice & meet its Bank Officer – Once the type of account is decided, the person should approach a convenient bank. He has to meet the bank officer regarding the opening of the account. The bank officer will provide a proposal form (Account Opening Form) to open bank account.
  2. Fill up Bank Account Opening Form – Proposal Form – The proposal form must be duly filled in all respects. Necessary details regarding name, address, occupation and other details must be filled in wherever required. Two or three specimen signatures are required on the specimen signature card. If the account is opened in joint names, then the form must be signed jointly. Now a days the banks ask the applicant to submit copies of his latest photograph for the purpose of his identification.
  3. Give References for Opening your Bank Account – The bank normally required references or introduction of the prospective account holder by any of the existing account holders for that type of account. The introducer introduces by signing his specimen signature in the column meant for the purpose The reference or introduction is required to safeguard the interest of the bank.
  4. Submit Bank Account Opening Form and Documents – The duly filled in proposal form must be submitted to the bank along with necessary documents. For e.g. in case of a joint stock company, the application form must accompany with the Board’s resolution to open the account. Also certified copies of articles and memorandum of association must be produced.
  5. Officer will verify your Bank Account Opening Form – The bank officer verifies the proposal form. He checks whether the form is complete in all respects or not. The accompanying documents are verified. If the officer is satisfied, then he clears the proposal form.
  6. Deposit initial amount in newly opened Bank Account – After getting the proposal form cleared, the necessary amount is deposited in the bank. After depositing the initial money, In the case of current account, a cheque book and a pay in slip book is issued.

Features of Current Bank Account

The main features of current account are as follows:-

  1. Current bank accounts are operated to run a business.
  2. It is a non-interest bearing bank account.
  3. It needs a higher minimum balance to be maintained as compared to the savings account.
  4. Penalty is charged if minimum balance is not maintained in the current account.
  5. It charges interest on the short-term funds borrowed from the bank.
  6. It is of a continuing nature as there is no fixed period to hold a current account.
  7. It does not promote saving habits with its account holders.
  8. Banker requires KYC (Know your Customers) norms to be completed before opening a current account.
  9. The main objective of current bank account is to enable the businessmen to conduct their business transactions smoothly.
  10. There is no restriction on the number and amount of deposits.
  11. 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.
  12. 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:-

  1. 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.
  2. It enables businessmen to carry out their business transactions properly and promptly.
  3. The businessmen can withdraw from their current accounts without any limit, subject to banking cash transaction tax, if any levied by the government.
  4. 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.
  5. It helps businessmen to make a direct payment to their creditors by issuing cheques, demand-drafts or pay-orders, etc.
  6. It enables a bank to collect money on behalf of its customers and credits the same in their customers’ current accounts.
  7. It enables the current account holder to obtain overdraft (short-term borrowing) facility.
  8. The creditors of the account holder can get credit-worthiness information of the account holder through inter-bank connection.
  9. It facilitates the industrial progress of the country. Without its help, businessmen would face difficulties in running their businesses.
  10. It has the facilities of Internet-banking and mobile-banking to carry out important business transactions with ease and quickly.
  11. It also provides various other advantages (benefits) such as:
    1. Deposit and withdrawal of money (cash) at any location.
    2. Multi-location funds transfer,
    3. Electronic funds transfer,
    4. Periodical (monthly, quarterly or yearly) e-mail or download of bank statements in various formats like ‘.XLS’, ‘.TXT’, ‘.PDF’, etc.
    5. Support from customer care executives.

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