How to Choose a Startup Current Account in India ?

A current account is akin to the financial co-pilot company founders and managers use to streamline cash flow. Replete with features like limitless withdrawals, quick deposits, and seamless transfers, a current account helps build a rhythm in the competitive business world.

Current accounts prioritise rapid transactions and flexibility over interest accumulation, making them ideal for businesses with frequent inflows and outflows. Often startups and new-age companies lack an understanding of how a current account can help them manage their daily cash flow requirements efficiently. Also, with numerous available options, narrowing down on one account can be a challenge.

To make an informed decision, use our guide to understand what a best startup current account should offer for smooth financial operations.

Current Account Features for Startups

To keep their finances organised and ensure smooth business operations, startups need a dedicated current account. The low transaction fees and ability to automate payments help startups streamline their business processes and manage finances more efficiently. Here are the key features every startup must look for in a current account.

Unlimited or High Transaction Limits
Minimum Balance Requirement (Average Minimum Balance)
Payment Solutions
Connected Banking
Digital Banking
Overdraft Facility
Smart Insights

1. Unlimited or High Transaction Limits

A current account functions like a business account and should offer high transaction limits for seamless cash flow. Banks allow transactions to the tune of ₹100 to ₹10 Lakhs per day. Often these transactions attract zero to minimal fees once the free transaction limit is over.

2. Minimum Balance Requirement (Average Minimum Balance)

The average minimum balance (AMB) requirement is the least amount of funds an account must always have. Many startup-friendly banks have eliminated the minimum balance requirement, either permanently or for a limited time.

For example, Kotak Mahindra Bank waives the AMB for the first year of their startup current account, while IDFC Bank eliminates it for the first three years.

3. Payment Solutions

Current accounts streamline the cash flow empowering smoother customer experiences with different forms of payment solutions.

Companies can save time and resources by automating bulk payments to employees, vendors, and business partners ensuring timely payments and maintaining a healthy cash flow.

Eliminating the need to chase clients and businesses for payments, it's easier to set up automatic debits from source accounts based on pre-approved agreements and invoices.

4. Connected Banking

A current account should offer the ability to connect the startup's current account with business and accounting services. For example, integration of the current account with ERP, payroll, and other solutions makes it easier for a startup to collect payments, manage salaries, and reconcile transactions.

Many banks also provide connected payroll management systems that can streamline the payroll process for a new-age company, giving it more flexibility and resources to focus on other tasks. Several banks offering a startup current account use payroll management systems like Zoho Books, Paybooks, RazorpayX, etc. to manage salaries and ensure compliance.

This feature is essential for growing companies, as connected banking allows them to focus on core business goals.

5. Digital Banking

Every current account today comes preloaded with an Internet banking option, offering exclusive access to manage their accounts and conduct various transactions from a single dashboard.

Extending this convenience further with mobile banking services, the account holders can interact with their account from the palm of their hands. Using the bank’s dedicated application, account holders can manage their finances efficiently.

6. Overdraft Facility

New-age companies facing cash flow shortages, irregular income, and unexpected expenses benefit from an overdraft facility. It provides a working capital buffer when the availability of funds is thin.

Some banks offer extended repayment periods or customised instalments for managing overdraft usage. The interest is charged only on the amount spent from the overdraft funds.

Managing the overdraft facility and ensuring timely repayments also helps startups build a good credit record, which is essential to taking loans in the future.

7. Smart Insights

Current accounts meant for new-age companies benefit from financial data shared in an intuitive format. These insights highlight business performance with different parameters like inflow and outflow of money and vendor-wide payments.

The reports also provide insights into spending, allowing founders and managers to view areas with the highest expenses. As a result, they can make informed decisions pertaining to their business.

Eligibility Criteria to Open a Startup Current Account

Opening a startup current account typically requires some standard documents like company incorporation papers, a commercial or office address, and proof of Indian residence.

Criteria/Condition	Details
Company Type	The company shall be incorporated in the form of a Partnership firm, LLP, Private, or Public Limited Company. Companies under Sole Proprietorships are also eligible. Individuals (freelancers) can also open a current account, provided they have the required documents to show proof of running a business.
Date of Incorporation	Banks check the company’s age starting from its date of incorporation. A majority of banks need the incorporation date to be less than three years, but with HDFC Bank, it's less than ten years.
Residence	The business owner and the business premises should be located in India. Banks require proof of residence and an official premises address to open the account.
Initial Deposit	To open a startup current account, an initial deposit is required. The amount can vary from ₹10,000 to ₹2,00,000.

Documents Required to Open a Startup Current Account

Here are the documents that a startup founder needs to provide for opening a current account:

Identify proof of the owner/partners/directors/shareholders
Address proof of the owner/partners/directors/shareholders
Passport-size photograph of owner/partners/directors/shareholders/authorised signatories
Communication address
Account opening cheque from an existing current or savings account

Let us get into detail with specific requirements for opening a current account as per the business type.

1. Sole Proprietorship

Any of the two documents from the list
Proprietor PAN card

2. Partnership Firm

Details of owners holding more than 15% of the firm's shares on the company letterhead.
Partnership Letter and Deed
PAN Card of the firm
Incorporation Certificate

3. Limited Liability Partnership (LLP)

Registration certificate by Registrar of LLP
Entity PAN Card
Shareholding pattern and list of shareholders with more than 15% shares.
LLP Deed
LLP letter (Ask for the standardised form from the bank)
List of designated partners in the firm
Account opening resolution

4. Private Limited Company

Certificate of incorporation
Memorandum of Association (MoA) and Articles of Association (AoA)
Board Resolution
List of Directions
Entity PAN Card
The pattern of shareholding and list of beneficiaries with more than 25% share in the company

Charges for a Startup Current Account

Banks levy several operational charges on all types of current accounts. However, some of these charges, fees, and penalties are waived for new-age companies to motivate financial inclusion and become a part of the mainstream business ecosystem.

Here are some common charges associated with a startup current account:

Demand Draft or Banker’s Cheque: Some banks charge a fee when an account holder deposits a demand draft or banker's cheque into the current account. Moreover, penalties are applied when a cheque bounces (cheque return).
Transaction Charges: The fees for sending payments through IMPS, RTGS, NEFT, etc.
Debit Card Charges: Fees to facilitate debit cards and extra charges are applicable on ATM transactions (withdrawal and deposit).
General Services Fees: Banks levy a small fee on balance enquiry, statements, SMS alerts, PIN generation, online banking, and home banking services. However, a majority of the banks providing products for new-age companies don’t incur these charges.
Non-Maintenance Charges: The inability to maintain the prescribed minimum account balance is penalised.

Trust Mysa to Open and Manage Your Startup's Current Account

At Mysa, we are dedicated to assisting startups and new-age companies in focusing on their core business activities while we take care of auxiliary operations. From account opening and management to auditing, accounting, and taxation, we will give you the time and resources to build a solid foundation for your business to grow and scale.

Experience paperless onboarding with Mysa digital account opening and access to an intuitive dashboard visualising transactions, real-time balances, and much more. We also segregate the transactions into different categories for easy understanding and provide periodic reports for your business.

Mysa integrates with Zoho Books to streamline your accounting and bookkeeping while helping with audits and taxation.

Experience the Mysa difference – open your first startup current account in minutes and channel your focus on what truly matters.

FAQs

1. What is a startup current account?

It's a form of account specially designed for small and new-age companies. These current accounts are designed to help businesses grow and streamline their financials without incurring too much overhead operational costs.

2. Is GST mandatory for current accounts?

GST certification is not necessary to open and operate a current account in any bank in India.

3. Can I open two current accounts?

Yes, it's possible to have two current accounts with different banks at the same time. Check the eligibility criteria and charges before opening a new current account with any bank.

4. What is the new RBI rule for current accounts?

In the latest regulation, the RBI has restricted banks from imposing penalties on the non-maintenance of inactive accounts. Moreover, in 2021, the RBI eased current account rules to allow lending banks to open current accounts and provide cash credit and overdraft facilities.

5. Is an ATM allowed in a current account?

Yes, current accounts come with a debit ATM card. Banks also charge maintenance and transaction fees on the ATM card. Always check these charges before opening a current account.

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