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29 March, 2024 11:07 IST
Financial Planning
   
Importance of current account for businesses
Source: IRIS (22-DEC-14)

A current account is usually required by businesses who have multiple day-to-day transactions with the bank. It includes deposits, withdrawals, and contra transactions. A current account is appropriate for Manufacturers, Distributors, Stockists, Hospitals and Dealers as well as Inventory Funding Customers. The basic idea behind current account is to help businesses progress in a smooth manner. Such type of accounts help customers expand their line of business into difference verticals without much difficulty in terms of finances.

 

Features

 

> Helps businesses run effectively enabling businessmen to carry out their business transactions smoothly.

 

> No restriction on the number and amount of deposits.

 

> No restriction on the amount of withdrawals made, provided the account holder has funds in his bank account.

 

> No interest earned on current account. However, some banks do pay interest on current accounts nowadays.

 

Who can apply for a Current Account?

 

Almost anyone can, depending on your credit history. A current account helps you make more out of your business. It is a form of deposit account that allows, payment by the mode of cheques.

 

Different banks have set separate criteria for opening a current account. Typically, banks consider the application if the applicant is 18 years old or above. Business owners and professional set-ups must ensure that they are registered with the relevant authorities. However, a bank has all the rights to accept or decline your application to open a current account.

 

Using Current Account for your Business

 

In India, the amount can be deposited and withdrawn at any time in a current account without giving any notice. The current account can also be used for making payments to creditors through the mode of cheques. Account holders can withdraw money via cheques, but they usually do not get any interest on their balance. This is probably one of the disadvantages of having a current account. However, the one of the biggest advantages of having a current account is the overdraft facility.

 

You can make payments whenever you want and set standing instructions to cover any monthly expenses. These monthly expenses could include your mortgage or rent, utility bills, and any other regular money spends. You can also go overdrawn, if need be, whenever you're running out of funds to meet these expenses. However, your bank needs to agree with you on this, as the fees for unsanctioned borrowing are way too high as compared to authorized overdrafts.

 

You need to determine how you want your current account to work for you before you opt for one and this will also then determine how you use the account too. Almost every bank offers a range of current accounts designed for those with specific needs or preferences. Kotak Mahindra Bank's offering is the ultimate current account for large enterprises whose needs go beyond even the most advanced current accounts. Choose a current account that suits your business needs the best.

 

(Contributed by Rachita Kotian, independent finance blogger)




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