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Importance of Commercial Bank Accounts in India

Commercial bank accounts inIndiaThey are also known as company bank accounts or business bank accounts. But they all mean the same thing. A business bank account is a separate account set up exclusively for a company and is the account that manages the company's funds. In addition to this it is also possible to manage other payments through a company bank account, including everything from accounts payable to payroll and credit repayments.

A business account can be a checking or savings account, comparable to the personal account option. Corporate bank accounts can separate personal and business accounts.

For companies of all sizes, having a business account is essential to keep their finances in order. If one wishes to trade in India, opening a business bank account to streamline local business operations is essential.

This article covers how to open a business bank account in India, including the types of accounts, and the documents usually required.

Types of Commercial Bank Accounts in India

Indian banks typically offer 3 types of accounts for commercial and corporate customers:

Business Current Account: Also known as a business checking account, this account type is designed to manage a company's cash flow and day-to-day financial transactions, providing features such as overdrafts and transaction processing. Business Savings Accounts: These accounts are ideal for earning interest on short- to medium-term savings while providing a level of cash liquidity for operational needs. Merchant Services Accounts: This account type allows businesses to accept and process electronic payment transactions, including mobile PoS and credit and debit cards.

In addition, most banks offer business credit cards as another financial product that provides companies with a convenient way to manage their expenses while helping to build and enhance their credit profile.

Can a foreign entity open a commercial bank account in India?

Foreign companies and persons of Indian origin (PIOs) residing abroad are eligible for theReserve Bank of India (RBI) to open a Special Non-Resident Rupee Account (SNRR) with an authorised financial institution.

SNRR accounts can only be used for business transactions in Rupees (INR). Interest accrued on these accounts is taxable in India and funds can be repatriated to non-domestic accounts.

Tip: Most banks in India also offer personal banking options such as NRE and NRO accounts for Non-Resident Indians (NRIs).

Factors to consider when opening a commercial bank account

There are many commercial banking options available in India, each offering products and services with unique features to cater to various business needs.

Here are some factors to consider when choosing where to open a business bank account:

Account Opening Process: Some banks may require an appointment or in-person verification to open a business bank account, while others offer an online application process. Account features: Look for features and offers that support and benefit your business operations, such as bulk payments, integration with invoicing or accounting software, and cheque services. Fees: Evaluate all applicable bank fees, including account opening fees, monthly fees, and any minimum balance or deposit requirements to ensure they fit your budget and financial plan. Transaction rules: Look for any transaction limits that may apply, such as caps on the amount or number of transactions per day or month, which may affect large or frequent transfers that are critical to your business operations.

What do I need to open a commercial bank account in India?

The supporting documentation that must be prepared when applying for a business account varies by bank and account type. However, banks usually require the following documents, depending on how your business is structured:

wholly-owned enterprise

Below are the documents that are usually required to register a sole proprietorship:

Proof of identity: A government-issued identity card, such as an Aadhaar number,PAN cardVoter's identity card or passport Proof of address: e.g. Aadhaar card, driver's licence or utility bill. Passport-size photograph: a recent passport-size photograph of the applicant.

Recommended Reading:What is an Indian PAN card?

Private and public companies

If you conduct business as another type of entity, such as a private limited company or a limited liability company, additional documentation must be provided, including:

Business PAN Card: The company's PAN (Permanent Account Number) card. Proof of identity and address of directors: e.g. Aadhar card, PAN card, recent utility bills or bank statements. Board Resolution: Document authorising the opening of the account. Proof of Business: Company formation documents such as Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA), Articles of Incorporation or Partnership Agreement depending on your business structure. Goods and Services Tax (GST) Registration Certificate: Proof that your business is registered under the Goods and Services Tax (GST) regime. Other documents: Depending on the nature of your business, you may need to provide other supporting documents, such as a business licence.

Recommended Reading:What is the Aadhaar card in India?

How to Open a Business Bank Account in India

The application process for a business bank account usually follows these basic steps. However, some financial institutions may have fewer or more requirements.

Step 1 - Select a commercial bank account

The first step is to choose the bank and specific account type that best meets your business needs.

Consider factors such as the availability of brick-and-mortar branches, online banking capabilities, and account-specific features of each bank, such as interest rates, access to business loans, and ATM withdrawal options. In addition, some banks offer business account programmes tailored to small businesses and start-ups.

We recommend that you visit each bank's website for a comprehensive comparison of their business finance products to help you choose the account that best supports your business operations.

Step 2 - Prepare the required documents and apply

After choosing where to open a business bank account, the next step is to prepare the required documents according to each account provider's guidelines.

Some banks offer an online application process where you can upload documents and complete KYC verification digitally. However, if the bank requires an in-person application, make sure you bring paper copies of all your documents with you to your appointment.

Step 3 - Setting Up Your Business Banking Account

Once the bank approves your application, you can set up your account. First, deposit enough funds to meet the minimum balance requirement. Then, depending on the bank's instructions, you may need to connect your account to the bank's mobile app or activate any credit card payment options. This ensures that your account is fully functional and available at all times.

How long does it take to open a business bank account in India?

The time taken to open a business bank account in India depends on a number of factors such as the bank, completeness of documents and the nature of the business. Usually, it may take about a week or more for the bank to approve your application.

What fees do I have to pay for a business bank account?

Below are the common costs of opening and maintaining a business bank account in India:

Account opening fee: usually free. Monthly account fee: ranges from Rs. 0 to Rs. 100. Minimum balance requirement: Approximately Rs. 1,000 to Rs. 500,000 depending on the type of account. Account non-maintenance fee: approximately Rs. 1,000 to Rs. 8,000. RTGSPayment: Rs. 0 to Rs. 50, depending on the amount transferred. NEFTTransfers: Usually between Rs. 0 and Rs. 25. Cheque Book Issuance: Mostly free. Account closure fees: Mostly free for accounts closed within 14 days

These fees vary by bank. We strongly recommend that you check the fees and pricing pages of each institution's website for the most current and accurate information.

Recommended Reading:RTGS Real-Time Payment System, India

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