Current account is a form of demand deposit account, designed for running transactions of a business establishment. The specific requirements of opening current account is depend upon the nature of the entity such as individuals, HUF, Proprietorship, Partnership firm, Limited companies, Trusts, societies clubs, liquidator, administrator etc. We have already published the specific requirements in this website for each type account mentioned above, including articles on KYC norms. In addition to those specific documents , there are some common requirements for opening all types of current accounts. Let us study which are those common requirements.
Declaration to the effect that the account opener is not the borrower of other banks:
When a new current account is to be opened, banks insist for a ‘declaration’ from the opener of the account, to the effect that the account holder does not enjoy credit facility with any other bank. If the account opener enjoys credit facilities from other bank/s, they are required to produce ‘No-Objection Certificate’ from their lending bank(s). It is binding on all the Banks to follow the above discipline. RBI would make the concerned bank liable for penalty under Banking Regulation Act 1949, if the bank which fails to comply above condition. However banks may open current accounts of prospective customers, if they do not receive any response for their notice from the existing bankers of the customer, after a minimum waiting period of a fortnight. If a response is received within a fortnight, the account opening bank should assess the situation with reference to information provided on the prospective customer and there is no need to solicit a formal no objection. In case of a prospective customer who is a corporate or large borrower enjoying credit facilities from more than one bank, the banks should exercise due diligence and inform the consortium leader, if under consortium, and the concerned banks, if under multiple banking arrangement.
New directives to Banks for opening Current Accounts
As per the existing RBI guidelines, the banks cannot open the current account of prospective customers without obtaining a ‘No-objection letter’ from the lending banks and in case no response is received from the existing bankers after a minimum waiting period of a fortnight.
The Reserve Bank of India in their notification informed that they have been receiving number of complaints against banks that proper due diligence was not followed by some branches of the banks for opening current accounts. In this connection, banking regulator advised all the banks to make use of information available from Central Repository of Information on Large Credits (CRILC) which collects-stores and disseminates data on all large borrowers’ credit exposures to and from Banks/Financial Institutions. Taking note of the situation especially of raising NPAs in banking sector, the Central Bank instructed all the banks to scrupulously follow the following due diligence instructions.
In addition to seeking NOC from the bank, where the customer is enjoying facilities on the basis of customer’s declaration, banks are required to seek information from CRILC. Banks should verify the data received from the CRILC, whether the prospective customer is enjoying credit facilities from another bank. Also, banks have to seek ‘No Objection certificate’ from the drawee bank where the initial deposit to current account is made by way of a cheque.
Reserve Bank has warned that it would take appropriate penal action against the banks in case of non-compliance of above instructions.
Photographs of depositors:
Photographs of all the persons who are authorised to operate the accounts shall submit two copies of latest photographs for the bank’s record. Photocopies of driving license/passport containing photographs cannot be substituted in place of photographs. Accounts opened by other banks, Local Authorities and Government Departments (excluding public sector undertakings or quasi-Government bodies) are exempted from the requirement of photographs.
Introduction of Account:
All new accounts to be opened in a bank should be properly introduced to the satisfaction of the bank. The accounts are introduced typically from any one of existing account holders who have been maintaining a satisfactorily conducted account for a period of at least six months. Account can be introduced by a respectable member of the public with acceptable bonafide and well known to the bank. Upon opening an account it is customary to send a letter to introducer’s address by the bank, thanking him/her for introducing the depositor. This letter would facilitate banker for cross verification, to confirm that he or she has actually introduced the new customer to the Bank. Banks normally send welcome letters to new customers, which will serve the purpose of cross examine the correctness of address furnished by the new customer. Bankers may at their discretion open an account without introduction, if they are satisfied about bonafide of the applicant and perceive the account to be opened is of low risk category.
Banks insist introduction of account from one of the existing account holder who have been maintaining satisfactorily conducted account for a period of at least six months.
Signature on account opening forms and specimen signature sheet :
In the account opening form as well as in specimen signature sheet the signature of all the partners/directors/trustees shall sign at appropriate spaces provided for signature/s. The signature(s) must be uniform and well-formed and they shall not differ on cheques and letters issued at all time.
No interest is payable on the balances held in current account. However interest will be paid to claimant, on credit balances lying in Current account of a deceased person from the date of his claim to settlement date at the rate of interest payable on SB account.