Opening a bank account in India

Based on the purpose, frequency of transaction, and location of the accountholder, banks offer many accounts to choose from.

Here is a list of some of the types of bank accounts available in India:

Current account

A current account is a deposit account for business owners, and entrepreneurs (such as proprietors, partnership firms, Public and private companies, trust, association of persons etc.), who need to make and receive payments more often than others. It includes deposits, withdrawals, and contra transactions. It is also known as Demand Deposit Account. These accounts hold more liquid deposits with no limit on the number of transactions per day. Current accounts allow overdraft facility, i.e. withdrawing more than what is currently available in the account. In addition, unlike savings accounts, where you earn some interest, these are zero-interest bearing accounts. You need to maintain a minimum balance to be able to operate current accounts. In India, current account can be opened by depositing Rs.5000 to Rs. 25,000.

Savings account

A savings bank account is a regular deposit account, where you earn a minimum rate of interest. Here, the number of transactions you can make each month is capped. Banks offer a variety of savings accounts based on the type of depositor, features of the product, age or purpose of holding the account, and so on.

There are zero-balance savings accounts and advanced ones with features like auto sweep, debit cards, bill payments and cross-product benefits.

Salary account

Among the different types of bank accounts, a salary account is where salaries of every employee are credited to at the beginning of the pay cycle. Employees can pick their type of salary account based on the features they want. The bank where you have a salary account, also maintains reimbursement accounts. This is where allowances and reimbursements are credited.

Fixed deposit account

A fixed deposit (FD) account allows earning a fixed rate of interest for keeping a certain sum of money locked in for a given time that is until the FD matures. FDs range between a maturity period of seven days to 10 years. The rate of interest earned on FDs will vary depending on the tenure of the FD. Generally, it is not possible to withdraw money from an FD before it matures. Some banks offer a premature withdrawal option, but in that case, the interest rate earned is lower.

Recurring deposit account

A recurring deposit (RD) has a fixed tenure, which means a fixed sum of money must be invested in it regularly, every month or once a quarter to earn interest. Unlike FDs, where it is possible to make a lump sum deposit, the sum needed to invest here is smaller and more frequent. It is not possible to change the tenure of the RD and the amount invested each month or quarter. Even in the case of RDs, you face a penalty in the form of a lower interest rate for premature withdrawal. The maturity period of an RD could range between six months to 10 years.

Non-Resident Individual of Indian Nationality or Indian Origin (NRI) accounts

There are different types of bank accounts for Indians or Indian-origin people living overseas. These accounts are called overseas accounts. They include two types of savings accounts and fixed deposits – Non-resident Ordinary (NRO) and Non-resident External (NRE) accounts. Banks also offer foreign currency Non-resident (FCNR) fixed deposit accounts.

Procedure for opening current account

Once the Company is incorporated, a bank account can be opened.

Reserve Bank of India’s (RBI) Know Your Customer Norms (KYC Norms) prescribes the procedures that the bank should follow to open the bank accounts. The KYC Norms as prescribed by RBI prevent banks from being used by criminal elements for money laundering or terrorist financing activities and enables the banks to know its customers better.

Even though RBI prescribes the KYC Norms, each bank may have its unique or separate policy for document requests and information as prescribed by the bank’s internal regulations for the opening of an account.

Requirements for opening a bank account

For opening a bank account of a Company, the name of the company, principal place of business, mailing address and telephone number must be provided.

In addition to above, the following documents must be submitted with the bank:

• Certificate of incorporation and Memorandum and Articles of Association
• Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account
• Power of Attorney granted to its managers, officers, or employees to transact business on its behalf
• Copy of Permanent Account Number (PAN) allotment letter
• Copy of the telephone bill

Length of time required to open a bank account: The expected time for completion is estimated to 1 to 2 weeks if all required documentary proofs are provided.

Type of bank account suitable for companies incorporated by non-residents in India

Once the company is incorporated in India whether in the form of Subsidiary company, Wholly Owned Subsidiary Company or Joint Venture by the foreign company or a foreign investor, the first step is to open a bank account. Depending upon the type of company and the nature of transactions done, various accounts can be opened.  Generally, a current account is the best-suited account for companies incorporated by non-residents in India.

Some of the most important advantages of a current account are:

• It enables proper and prompt business transactions
• It enables the current account holder to obtain overdraft (short-term borrowing) facility
• It has the facilities of Internet-banking and mobile banking to carry out important business transactions with ease and quickly
• It is possible to withdraw from current accounts without any limit, subject to banking cash transaction tax, if any levied by the government
• It allows multi-location and electronic funds transfer

• It provides other benefits in the form of inward remittances, deposit and withdrawals at any location, multi-location transfer, with a very insignificant cost

• It is possible to obtain periodical (monthly, quarterly or yearly) e-mail or download bank statements in various formats like '.XLS', '.TXT', '.PDF', etc.