Why a Current Account is Useful for Small Firms | Kotak Mahindra Bank
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17 AUGUST, 2023

Every business enterprise, irrespective of its size and nature, requires a Current Account for conducting day to day financial transactions. Unlike a savings account, a Current Account allows limitless transactions in a day and hence, smoothens the process of fund management for the businesses.

Below are the benefits of a having a Current Account, which makes it a useful entity for every small or medium sized business firms.

Separates business finances from personal finances

No matter what’s the size of your business, segregating business finances from personal finances is essential. While you can continue to conduct your personal transactions through your savings account, a Current Account should be used for all business-related transactions. This will not only help you in maintaining a clear record of your business transactions but also aid you in better financial management.

Limitless number of financial transactions

One of the main reasons why businesses require a Current Account is because it allows unlimited financial transactions in a day, unlike a savings account. Depending upon the nature of your business, you may have to conduct several high-volume transactions each day and this can be done only through a Current Account.

In case of a savings account, usually there is a limit on the number of transactions you can conduct each day or else, you may be charged a heavy fee by the bank.

Overdraft facility

Another benefit of a Current Account for your business is that it comes with an overdraft facility. This essentially means that you can overdraw an amount which is more than your current available balance. Banks may or may not levy any interest on the overdraft amount used by you. This facility can help you meet urgent cash-flow requirements for your business.

Additional Read: 5 common Current Account charges and fees you must be aware of

Conduct foreign transactions worry-free

Many banks offer Forex facilities with their Current Account which means that you are not required to have a separate Forex account for conducting foreign currency transactions. You can do so directly through a global-trade current account. You can take advice from an expert regarding the legal regulations for conducting foreign trade or investment.

Positive impact on credit worthiness

The credit worthiness of your business plays an important role when you apply for a business loan or advance credit. You can get a letter issued by the bank that you’re holding a Current Account with it and furnish that letter to the borrower. This will help you in proving your creditworthiness and subsequently, avail a loan at lower interest rates.

Apart from the above-mentioned benefits, many banks also offer some value-added services to the current account holders at no extra cost. These services may include doorstep banking, free inward remittances, PAN India cash deposit and withdrawal etc. which can further make business banking easy and convenient.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.