Current accounts

Amid different types of accounts maintained by a commercial bank, the current accounts are essentially the important type of account for a businessmen. Current account is an account which allows doing transactions via cheques.

Opening a current account

Current accounts can be opened individually, jointly or in the name of businesses. Most of the businessmen use current accounts in order to conduct their business activities easily. When opening such an account, an individual having an active current account in the respective commercial bank is required to introduce the new customer by completing the relevant application form (mandate). When opening a current account the relevant current account mandate, deposit slip and signature card need to be completed and submitted along with the national identity card.

Current accounts do not earn an interest. The bank will charge a fee if the balance in the current account reduces below a certain minimum level and for the other services provided by the bank to the account holder.

There are several advantages of maintaining a current account.

1. Ability to make payments via cheques.

The ability to make payments via cheques make it easy and secure for the transactions done by the businessmen.

Examples :- Employee salaries, electricity bills, insurance premiums can be paid via cheques.

2. Ability to obtain bank overdraft facilities

Bank overdraft facilities can be obtained by getting permission from the bank to write cheques for a balance which exceeds the deposited balance in the current account. The amount by which the current account holder has been indebted to the bank by issuing cheques under the permission of the bank exceeding the balance in the account is known as the bank overdraft. The businessmen often use this facility to fulfill short term credit requirements. 

3. To collect remittances

The money to be received by businessmen from other organizations and individuals can be collected directly to the current accounts.

Examples :- dividends, interest income, remittances from debtors

4. To activate standing orders

There are certain payments that businessmen have to pay continuously for certain activities. A request can be made to the bank in writing by filling the relevant application form to pay a certain amount of money on certain time intervals continuously. The payments made by the bank according to such written requests are known as payments based on standing orders.

Examples :- payment of insurance premiums, payment of loan installments

5. Receiving a bank statement

The bank sends a statement to the current account holder stating the transactions done through the current account. This is known as the bank statement. This statement can be obtained monthly, quarterly or as per the requirement of the account holder. Through this statement, the deposits, withdrawals and the balance in the account are informed. In addition, this statement helps to reconcile the reasons for the difference between the balance in the bank account of the business and the balance in the bank statement, if any.


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