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.
