Current account is an account with minimum amount of boundaries. Most individuals do not need this account, one need this account only if he makes a number of deposits and withdrawals in a single day and many of the deposits are drawn on outstation banks. Banks accept deposits in current account and allow unlimited withdrawals subject to a minimum balance. This minimum balance differs from Bank to Bank. Banks will not pay any interest on a current account. On the other hand, banks charge service charges, on such accounts. Opening of a current account is meant for a business enterprise or high worth individuals who deal with a lot of third party cheques, drafts etc. or who may at times need to borrow money from the Bank against some security.
Current accounts are mainly used by businessmen and are not generally used for the purpose of investment. These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day. Most of the current account are firm / company accounts. Cheque book facility is provided in this type of accounts and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties.
According to Reserve Bank, Current account is "a form of demand deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and shall also be deemed to include other deposit accounts that are neither savings deposit nor term deposit."
See Also: What Is Current Account Deficit?
Current accounts are opened by those who have commercial interests and have the need to issue many cheques. These include :
The RBI has asked banks to incorporate a certificate in account opening forms confirming the identity, occupation and address of the prospective customer signed by the introducer.
Consequences of improper introduction
Several banks permit accounts to be opened by “self introduction.” This can be done by the person opening the account depositing a cheque drawn by him on another bank where he maintains an account. Banks consider this as acceptable risk.
The RBI has stated that to maintain credit discipline banks should do the following :
At the time of account opening, the customer could mention how the account should be operated. This is very important for joint accounts or accounts with multiple holders.
Two types of account operations are:
At the time the account is opened, the customer must ideally open the account with a cash deposit. An account should not be opened on a zero balance as the banker in this case has not taken on deposit any amount.
While issuing a cheque book, the customer must fill in a cheque requisition form contained in the cheque book and hand it over to the bank. Usually banks send new cheque books to customers by courier. The RBI has declared that cheque books should be handed over to customers/ their representatives at the branch of the bank where they bank if they want it given to them at the bank.
Banks either give customers a passbook which details their account or a statement of their account with the bank at the end of a month.
The Reserve Bank has stated that entries in passbooks should not be unreadable and that brief understandable particulars must be entered.
Operations in an account will be stopped in the following cases :
Countervailing means any benefit or interest allowed on current account maintained with the bank”. In short if a depositor is getting a free holiday for a current account maintained, the free holiday would be viewed as countervailing interest. Banks are allowed to pay interest on the current account of a Regional Rural Bank (RRB) they have sponsored. The rate that can be paid is half a percent lesser than the borrowing rate of RRB. Since May 1983 banks have been allowed to pay interest on the balances in the current account standing in the name of a deceased/dead individual depositor/ sole proprietorship concern from the date of the depositor’s death till the date the account is closed at the rate applicable to savings deposits.
Tips to remember while going for a current account
Banks must insist on a statement from the account holder to the effect that he is not enjoying any credit facility with any other bank or get a declaration giving particulars of credit facilities enjoyed by him with any other bank.
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