How to open a current account for your business: documents, charges, bank choice

Open a current account in the business name as soon as you have your first proof of business, ideally before the first sale. A proprietor needs PAN, Aadhaar and one or two business proofs such as a GST certificate or Udyam registration; firms, LLPs and companies add their deed or incorporation papers and a resolution. Pick a bank on charges, UPI QR, bulk payments and branch access, not on the relationship manager's promises.

Why a savings account is the wrong home for business money

A savings account is designed for personal money and banks treat it that way. Most restrict the number of free debits and cash deposits a month, pay interest that is taxable in your hands, and reserve the right to freeze or convert an account that shows commercial activity such as hundreds of small UPI receipts or payments to suppliers. Some banks explicitly prohibit business use in their terms.

The practical problems bite sooner. You cannot get an overdraft or cash credit on a savings account, cannot upload a bulk NEFT file for salaries, cannot get a merchant QR in your shop's name, and cannot hand a customer a cheque bearing your trade name. When you file returns, mixed personal and business entries make your books unreliable and your CA slower, which is exactly the problem bookkeeping basics warn about.

There is also a tax angle. Under Section 44AD, digital receipts are deemed to earn 6% profit against 8% for cash, and the income tax department reads bank statements to check turnover. A clean current account with only business transactions makes that check painless. A savings account with your salary, your spouse's transfers and shop receipts mixed together invites questions.

Documents by entity type

Every bank follows the RBI Master Direction on KYC, so the lists are similar across banks, though a branch may ask for one more paper than the website shows. Carry originals for verification and self-attested copies.

For every entity, a proof of the business address (electricity bill, rent agreement plus landlord's bill, or property tax receipt) and a specimen signature of each signatory are standard. For companies and LLPs the beneficial ownership rules under the Prevention of Money Laundering (Maintenance of Records) Rules now start at 10% ownership or control, down from 25%, so be ready to name every such person with their KYC.

Proof of business: what counts

This is where proprietors get stuck, because the business has no incorporation certificate. The RBI list of acceptable documents for a proprietary concern includes:

• GST registration certificate (REG-06)
• Udyam registration certificate, free at udyamregistration.gov.in
• Shops and Establishments certificate or licence from the state labour department or municipal body
• Trade licence from the municipal corporation
• Importer Exporter Code from DGFT
• A licence or certificate of practice issued in the proprietor's name by a professional body (ICAI, Bar Council, Medical Council)
• The complete income tax return, not just the acknowledgement, in the name of the proprietary concern, with the return duly acknowledged
• Utility bills such as electricity, water or landline in the name of the proprietary concern

Banks normally ask for any two. The RBI allows the bank to open the account on a single document if it is satisfied after due diligence, but most branches apply the two-document rule, so the quickest route is Udyam plus GST or Udyam plus Shops Act. Udyam takes ten minutes online with Aadhaar and PAN and is free, which makes it the first thing to get. Read the Udyam registration guide and the Shops and Establishment guide for the exact steps.

If you have none of these yet, some banks will accept a GST application acknowledgement (ARN) with an undertaking to submit the certificate within a set period. Ask before you visit.

Minimum balance, charges and the hidden fee schedule

A current account earns no interest and charges for many things a savings account does for free. The main items to compare are:

• Average monthly or quarterly balance (AMB or AQB). Basic variants at public sector banks ask for ₹5,000 to ₹10,000; private bank variants range from ₹10,000 to ₹1,00,000 and above, with more free services at higher tiers. Non-maintenance charges run ₹500 to ₹1,500 per month or a percentage of the shortfall.
• Cash deposit. Free up to a limit (often ₹1,00,000 to ₹2,00,000 a month, or a multiple of the balance), then ₹2.50 to ₹5 per ₹1,000. Cash deposits at non-home branches or outstation branches cost more.
• Cash withdrawal. Usually free at the home branch up to a limit, charged beyond.
• Cheque books. First one or two books free, then ₹2 to ₹4 per leaf. Outstation cheque collection has its own charges.
• NEFT, RTGS and IMPS. Most banks now offer free online transfers on current accounts, but branch-initiated transfers cost ₹20 to ₹50. Confirm rather than assume.
• Debit card, SMS alerts, account statements, signature verification, stop payment. Small individually, but they add up.
• Bounced cheques and failed ECS or NACH debits. ₹300 to ₹750 per instance, and inward cheque returns also damage your credit history.

Every bank publishes a schedule of charges PDF; download it and read the current account section before signing. Also note RBI's rules on current accounts for borrowers: if you have a cash credit or overdraft facility with one bank, other banks are restricted from opening a current account for you unless your total exposure is below ₹5 crore and you declare it. Sort this out early if you plan to borrow.

Choosing a bank: what actually matters

The right bank is the one that fits how money moves in your business. Ask these questions:

• UPI QR in the business name. Can the bank issue a merchant QR or a UPI ID like shopname@bank tied to the current account, with settlement the same day and a transaction feed you can download? For a shop this matters more than anything else.
• Bulk payments. Can you upload a file for salaries or vendor payments and approve it in one go? Ask whether the bank accepts a standard NEFT file and whether there is a per-file fee.
• Net banking with maker and checker. Two-person approval stops a single compromised login draining the account. Even a two-person shop should use it.
• API or accounting integrations. Larger businesses want statement feeds and payment initiation from software. If you are not there yet, at least confirm you can download statements as PDF and Excel for any date range.
• Branch and cash access. If you deposit cash weekly, a branch or cash deposit machine within a short walk saves hours. Ask about free cash deposit limits at the branch you will actually use.
• Trade and export services. Exporters need an AD code letter and inward remittance handling; check the bank does this at your branch.
• Overdraft path. Ask what an OD against property or stock requires and whether a year of clean statements gets you there.

Public sector banks tend to win on low balance requirements and free services; private banks on speed, app quality and merchant tools. Many businesses keep one of each: a low-cost account for collections and a full-featured one for payments and borrowing.

Worked example: what a Kochi electronics shop actually pays

Take an electronics shop in Kochi with these monthly patterns: 600 UPI receipts, 40 cheque deposits, ₹3,50,000 of cash deposits, 25 NEFT payments to suppliers made online, and a payroll of 4 people paid by bulk file. The owner is comparing two current account variants.

Bank A (public sector, basic variant): AQB ₹10,000, non-maintenance ₹600 a quarter, free cash deposit up to ₹2,00,000 a month then ₹3 per ₹1,000, online NEFT free, cheque leaves ₹3 each after the first 50 a year, bulk payment file ₹10 per transaction.

• Cash deposit charge: (₹3,50,000 minus ₹2,00,000) = ₹1,50,000 excess, so 150 × ₹3 = ₹450 a month, ₹5,400 a year.
• Cheque leaves: the shop writes about 15 cheques a month, 180 a year, so 130 chargeable leaves × ₹3 = ₹390 a year.
• Bulk payroll: 4 × ₹10 × 12 = ₹480 a year.
• Balance cost: keeping ₹10,000 idle costs nothing in charges, and the opportunity cost at a 6% deposit rate is ₹600 a year.
• Total: about ₹6,870 a year plus GST on charges.

Bank B (private, premium variant): AMB ₹1,00,000, non-maintenance ₹1,500 a month, free cash deposit up to ₹5,00,000 a month, free online NEFT and bulk payments, 200 free cheque leaves a year, merchant QR with same-day settlement and a dashboard.

• Cash deposit charge: nil.
• Cheque leaves: nil.
• Bulk payroll: nil.
• Balance cost: keeping ₹1,00,000 idle costs about ₹6,000 a year in lost deposit interest. If the balance slips below the minimum in even two months, add ₹3,000 of penalties.
• Total: ₹6,000 to ₹9,000 a year.

The two land in the same range, so the decision turns on what the shop values: Bank B's dashboard and free bulk tools save the owner a few hours a month, while Bank A is safer for a business whose balance swings wildly. A shop depositing ₹8 lakh of cash a month would find Bank A's charges jump to ₹21,600 a year and Bank B clearly better. Run your own numbers rather than picking the bank whose staff visited your shop.

What to set up on day one

Opening the account is half the job. Before the first customer pays, finish these:

1. Net banking and the mobile app, with a maker-checker setup if the bank offers it and transaction limits that match your normal ticket size.
2. UPI VPA and merchant QR in the shop name, linked to the current account. Print the QR at the counter and on invoices. Our UPI for business guide covers limits and settlement.
3. Cheque book with the trade name printed, even if you rarely write cheques; landlords and government offices still ask.
4. Debit card for online purchases, with a low limit and alerts on.
5. SMS and email alerts for every debit, and a monthly statement to a mailbox your CA can see.
6. GST portal link. Add the bank account to your GST registration within 45 days of registration or before your first return, or the portal will block GSTR-1 filing.
7. Payment details on your documents. Put the account name, number, IFSC and UPI ID on every invoice so customers pay the right account the first time.
8. A record-keeping habit. Download the statement monthly and convert it to Excel, so your books never fall behind and reconciliation stays a quick check.

Tips for proprietors in particular

Proprietors have the most freedom and the most temptation to blur lines. The account name should be your trade name with your own name as the proprietor, so cheques and UPI both work. Never pay household expenses from the account; transfer a fixed amount to your savings account monthly as drawings instead, which keeps the ledger clean and makes your profit visible.

Keep the free cash deposit limit in mind when deciding how much cash to accept, and remember the income tax rules in our cash transaction limits guide: you cannot receive ₹2,00,000 or more in cash from one person in a day or for one transaction under Section 269ST, and cash expense payments above ₹10,000 a day to one person are disallowed under Section 40A(3). A current account makes both rules easy to follow because every large receipt and payment goes through the bank.

Finally, review the account after a year. Once you have twelve months of clean statements, you qualify for better variants, an overdraft against stock or property, and lower charges. Banks rarely upgrade you on their own; ask.

Common mistakes when opening and running a current account

• Opening at the wrong branch. The home branch determines free cash deposit and withdrawal limits; pick the one nearest your shop or godown, not the one near your house.
• Signing for a premium variant on day one. If your average balance will be ₹30,000, a ₹1,00,000 AMB account will cost ₹18,000 a year in penalties before you earn a rupee.
• Not adding the account to the GST portal. Filing gets blocked and refunds go nowhere.
• Mixing partners' personal transfers with firm money. Treat capital introductions and drawings as separate, documented entries.
• Ignoring the IFSC on payment instructions. A wrong IFSC delays supplier payments by days. Verify codes before saving a beneficiary.
• Leaving a dormant account open. Unused accounts still charge non-maintenance fees; close what you do not use, in writing, and keep the closure letter.

How VyaparKit helps

Once the account is live, VyaparKit's public tools cover the everyday banking chores. Use the IFSC lookup and MICR lookup to verify branch codes before you add a beneficiary or print details on an invoice. Generate a printable counter code with the UPI QR generator and send collect requests for outstanding bills with the UPI payment link tool. When month end comes, the bank statement to Excel converter turns the bank's PDF into a spreadsheet your CA can work with, without OCR or uploads that keep your data.

Next steps

• Get Udyam registration today and either GST (if applicable) or your state Shops and Establishments certificate, so you have two proofs of business.
• Download the schedule of charges of two or three banks and run your monthly cash, cheque and transfer volumes through them as in the Kochi example.
• Book the account opening with all originals, a specimen signature and, for firms and companies, the resolution or authority letter.
• On the day the account is live, set up net banking, UPI QR, alerts and add the account to the GST portal.
• Put the account name, number, IFSC and UPI ID on your invoice template and start a monthly statement download habit.