Things to Consider Before Opening A Current Account | Kotak Mahindra Bank
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20 JULY, 2023

If you are running a business, no matter the type or the size, opening a Current Account must be on your to-do list, given all the several Current Account benefits. From startups to home-based businesses, a business bank account is a must. But before you go ahead and check this important item off your list, here are some things you need to consider when opening a Current Account: 

Look into the average quarterly balance: 

Current Accounts come with minimum balance requirements but, unlike Savings Accounts, do not pay any interest on the balance. The Average Quarterly Balance (AQB) requirement can range from Rs. 10,000 to Rs. 2,50,000 lakh and more. This number depends on the type of Current Account you are opening and the features it comes with. You need to be careful because a high AQB would unnecessarily tie up your working capital. 

Consider the features you need

A Current Account’s benefits are different from those of a Savings Account. Free cheque payments and collections, higher withdrawals and transaction limits, free demand drafts and pay orders, home banking services, and more are some of the Current Account benefits designed to meet the needs of business owners. It’s important to go through the Current Account benefits offered by banks and identify which type of Current Account suits your business needs. This is because while many of the benefits will come free of charge, they will also require a higher AQB. 

Check the overdraft facility limit 

One of the most significant Current Account benefits is quick access to credit in the form of an overdraft facility. When you require funds for meeting short-term business needs and have insufficient working capital, you can overdraw on your Current Account balance by a certain amount depending on your current account’s overdraft limit. This is essentially a short-term unsecured loan available on demand as per your needs. Having immediate access to additional funds is crucial to seize business opportunities and overcome operational issues. 

Additional Read - Understanding the overdraft facility in a current account

Review interest rates

While a Current Account does not pay interest on your AQB, some accounts offer the opportunity to earn attractive returns on your excess balance with sweep-in and sweep-out facilities. With this Current Account benefit, your idle funds above a pre-fixed threshold limit get automatically converted into a Terms Deposit and earn you attractive returns. Hence, make sure to check this facility offered by the banks so that you can make the best use of your idle funds. 

Think of the long-term 

When you are considering opening a Current Account, you need to think of the long-term. Your business banking needs now may be minimal, but as you grow and expand, your needs will evolve too. Hence, you need to opt for a bank that provides a range of services efficiently and conveniently. This means in addition to premium services, you also need to check their range of digital services and the quality of their customer service. 

Going through all the Current Account benefits, charges, requirements, etc., may take some time. But this activity is crucial so that when you open your Current Account, you do not face hiccups then, and it can seamlessly meet all your business banking needs.

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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.