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A single current account caters to all banking needs of businesses and professionals to carry out and maintain a record of every transaction, and comes with overdraft facilities, unlimited withdrawals, and many essential features.
A simple know your customer (KYC) process with submission of documents related to proof of entity, identity, and address along with a recent photograph are enough to open a current account. However, other relevant documents have to be submitted as per the type of registration of the business, or nature of the banking needs, to open a current account.
The Reserve Bank of India (RBI) mandates scheduled commercial banks, as well as payments banks, to offer current accounts to businesses whose banking exposure is more than INR 5 crore. However, there is no restriction on opening current accounts by businesses whose banking exposure is less than INR 5 crore.
Here is a list of businesses that require current accounts.
Sole Proprietorship: A sole proprietorship, as the name suggests, is a business that is managed by a single person. Sole proprietorships are ideal for small businesses, who do not require raising funds, and are recognized as per its service or sales tax registration.
Private/Public Limited Company (Pvt. Ltd.): A private limited company (popularly, Pvt. Ltd.) is an ideal business structure for startups and MSMEs. Such business entities have to keep records of all board meetings, file annual returns with the Registrar of Companies (RoC), as well as income tax returns, etc. Such companies are industry-specific, and pay taxes on profits, dividend distribution tax (DDT), Minimum Alternate Tax (MAT), etc.
Limited Liability Partnership (LLP): A limited liability company (LLC) is a business that is unlikely to require equity funding. LLCs can have as many partners, and have a simpler structure and fewer compliances than a private limited company. Tax surcharge and dividend distribution tax do not apply to LLCs.
Hindu Undivided Family Business: A HUF business is owned and managed jointly by members of Hindu undivided family (HUF) who have equal rights and shares in the business and ancestral property. HUF business is usually controlled by a karta, who has full control over the business.
Partnership Firm: A partnership firm is a business created after a contract between individual partners who have equal shares and rights in the firm. Partnership firms in India are governed by laws of the Indian Partnership Act, 1932.
One Person Company (OPC): A one person company, also referred to as OPC has a single promoter with full control over the company. However, if OPC crosses a revenue of over INR 2 crore and paid-up capital of over INR 50 lakh, it needs to be converted into a private limited company. OPCs are required to conduct a statutory audit, submit annual and IT returns, and comply with taxes.
Besides businesses, current accounts can also be opened by government bodies, educational institutions, as well as trust, society, association and club (TASC).
All entities are required to submit basic KYC (know your customer) documents, for:
Proof of identity: PAN Card, passport, voter identity card, driving license, aadhaar card.
Proof of address: Passport, voter ID card, driving license, aadhaar card.
Here are a list of documents required for opening a current account as per type of businesses or entities, as follows:
Sole Proprietorship
Public and Private Limited Companies
Partnership Firm
Limited Liability Partnership (LLP)
One Person Company (OPC)
Hindu Undivided Family Business
Trust, Society, Association and Club (TASC) Limited
A current account caters to the banking needs of businesses or entities to carry out transactions conveniently.
Monthly average balance (MAB) is the minimum funds required to be maintained by current account holders. MAB requirements of banks range from INR 5,000 to INR 10 lakh.
Businesses are usually asked to produce documents related to proof of address and income, as well as documents related as per the sector they represent–including personal identification number card, a valid startup certificate for startups, certificate of incorporation and memorandum of the association for companies and trusts, a partnership agreement for partnership businesses, etc.
Relevant documents for proof of entity, address, and identity, like mentioned above, have to be submitted to open a current account as directed by the RBI.
Documents including, PAN card, passport, voter identity card, driving license, aadhaar card can be submitted by businesses or entities as proof of identity to open a current account.
Documents related to proof of entity, identity, and address are enough to open a current account. However, relevant documents have to be submitted as per the type of registration of the business, or nature of the banking needs, to open a current account.
