Conceptual · Article 4.1.2

Current Accounts.

The Business Operating Account That Pays You Nothing.

Published as on 22 July 2026

A current account is a demand deposit built for one job: moving money at high volume. It is the standard operating account for businesses and professionals — unlimited transactions, overdraft and cash-credit access, higher minimum balances. But it carries a defining feature that is a regulation, not a bank's choice: the RBI's Master Direction on Interest Rate on Deposits, 2025, bars banks from paying any interest on current account balances. Every rupee left overnight earns zero. That makes it an operations tool, never an investment — the discipline is to run the account for what it does well and sweep idle float into FDs or liquid funds, not to leave money sitting at nil.

Zero

Interest · By RBI Mandate

Unlimited

Transactions

₹5 lakh

DICGC Insured

₹50 lakh

SFT Reporting

Executive Summary · Page 2

Executive Summary · 6 Findings

A current account answers a different question from every other account you hold: not "where can my money grow?" but "how do I run the plumbing of a business?" Its whole design is throughput — pay vendors, collect from customers, disburse salaries, settle tax, at any frequency. In return for that, the law strips out the one thing savers prize: it pays no interest, and cannot, by RBI mandate. Judge it as an operations tool, and it is excellent. Judge it as a place to keep money, and it quietly bleeds value every single day.

Covers what a current account is and why interest is prohibited, who actually needs one, minimum-balance requirements and charges, the zero-interest opportunity cost and how auto-sweep FDs and liquid funds solve it, overdraft versus cash credit, cash-deposit reporting under Rule 114E, the business-level tax treatment, startup and neo-bank products, and six questions Indian business owners ask.

Key Findings

An operating account, not an investment.

A current account is a demand deposit for businesses and high-frequency transactors — funds in and out at any time, in any volume, without notice. Its purpose is settlement and cash management, not return. The right benchmark for it is operational efficiency: transaction limits, credit access, integrations — never yield.

Zero interest is a prohibition, not a policy.

The RBI's Master Direction on Interest Rate on Deposits, 2025, permits banks to accept current account balances only as interest-free deposits. This is identical across every scheduled commercial bank — public sector, private and small finance. There is no "high-interest current account" in India's regulated system; anyone advertising one is describing a sweep, not the account itself.

You pay for throughput and credit.

What the zero interest buys is unlimited transactions (savings-account withdrawal caps were removed in April 2020, but current accounts never had them), plus access to overdraft and cash-credit working-capital lines a savings account can never offer. The trade-off is a higher Minimum Average Balance — from about ₹5,000 at a basic PSB to ₹1 lakh or more at premium metro variants.

Idle float is a silent cost — sweep it.

Since balances earn nothing, an average ₹50 lakh left in a current account for a year forgoes roughly ₹3.5 lakh against a 7% FD. Auto-sweep FDs (SBI sweep-in, IDFC FIRST Super Account, HDFC SmartUp) move surplus above a threshold into short FDs and back on demand; treasury surpluses of ₹25 lakh+ often sit in liquid funds yielding ~6.3–6.5% with next-day access.

No interest income — but real business-tax angles.

Because there is no interest, there is nothing to declare and no 80TTA/80TTB relief applies. The tax questions are business-level: overdraft and cash-credit interest and all bank charges are deductible under Section 37(1); large cash deposits inconsistent with turnover risk Section 68 treatment at an effective rate above 80%.

Not a GST requirement — and only ₹5 lakh insured.

A current account is not legally required for GST; the portal accepts a savings account, and bank details can follow within 45 days. Deposits are DICGC-insured only to ₹5 lakh per bank, so large balances are exposed. Startup zero-MAB products (IDFC FIRST, HDFC SmartUp, ICICI iStartup) and neo-bank platforms address both the balance and the tooling.

At A Glance

Metric	Value	Detail
Account type	Demand deposit	Business use
Interest	Zero	RBI-barred
Transactions	Unlimited	No cap
Typical MAB	₹5k–₹1L+	Bank / variant
Credit access	OD & CC	Working capital
Deposit insurance	₹5 lakh	DICGC, per bank
SFT reporting	₹50 lakh/yr	Rule 114E
Best use	Business ops	Not for parking

Exhibit 01: The Cost of Idle Float (at 6.5% p.a.)

Avg Balance	Foregone / yr	Foregone / mo
₹10 lakh	₹65,000	~₹5,400
₹25 lakh	₹1.63 lakh	~₹13,500
₹50 lakh	₹3.25 lakh	~₹27,000
₹1 crore	₹6.5 lakh	~₹54,000

Illustrative, FY 2025-26. The forgone return is what an equivalent balance would have earned in a 6.5% FD or liquid fund. It is not a fee you can see on a statement — which is exactly why it goes unnoticed. Any business carrying a persistent float should be sweeping it.

The Opening · Page 3

The Opening

A current account is the least glamorous instrument in Indian banking and the most misunderstood. Ask what it is for and the honest answer is nothing you would call investing: it is the account through which a business breathes — vendor payments out, customer collections in, salaries on the first, tax on the due date, at whatever frequency the day demands. It is a demand deposit, so money moves without notice or limit. And it has one property that startles people the first time they hear it: it is legally forbidden from paying interest.

"A current account is the one bank account designed to pay you nothing — and that is the law, not the bank being stingy. The moment you understand it as plumbing rather than a piggy bank, every decision about it gets simpler."
Plumbing, Not a Piggy Bank

The rule behind the zero. Paragraph 29.5 of the RBI's Master Direction on Interest Rate on Deposits, 2025, states that banks may accept current account balances only as interest-free deposits. It is a prohibition, identical at every scheduled bank, and it is why the phrase "high-interest current account" does not describe anything real. What varies between banks is not the interest — there is none — but the Minimum Average Balance, the charges, the transaction tooling, and the sweep facilities layered on top.

What you get in exchange. Unlimited transactions, overdraft and cash-credit facilities that unlock working capital, and cash-management services no savings account offers. The design assumption is high-volume transacting, and the account delivers on exactly that. The catch sits entirely on the balance you leave behind: it earns zero, so idle float is a cost you never see on a statement.

The Honest Boundary: A current account is NOT an investment — do not "keep savings" in it. It is NOT a GST requirement — a savings account is accepted on the portal. It is NOT a safe home for large idle cash — only ₹5 lakh is DICGC-insured per bank. It IS the correct operating account for any business with real transaction volumes, provided you sweep the surplus and treat the balance as working cash, not stored wealth.

Structure

Part I

What a Current Account Is, Who Needs One & Where It Fits

Part II

Minimum Balances, Charges & the Zero-Interest Problem

Part III

Overdraft, Cash Credit, Cash Reporting & Startup Accounts

Part IV

The Verdict: An Operations Tool, Used Correctly

Use If

✓ You run a business or profession

✓ High transaction volumes

✓ You need overdraft or cash credit

✓ You'll sweep idle float

Do NOT Rely On It For

✕ Earning any interest

✕ Personal savings

✕ Holding large idle cash

✕ A GST "requirement"

Part I

What a Current Account Is, Who Actually Needs One, and Where It Fits

The two features that define it — zero interest by regulation and no transaction limits; who a current account genuinely serves versus who can do without one; and why it is the operating layer of a business's money, not the saving layer.

Part I · Page 4

Current vs Savings — The Real Differences

Feature	Current	Savings
Interest	Zero (barred)	~2.7–4%
Transactions	Unlimited	Unlimited*
Typical MAB	₹5k–₹1L+	₹0–₹10k
OD / CC	Yes	No
Built for	Business	Individuals

*The RBI removed the free-withdrawal cap on savings accounts in April 2020; current accounts never had one. The two accounts are built for opposite jobs — one to store and grow small balances, the other to move large ones.

Why the Interest Is Zero

A Regulation, Not a Choice

Paragraph 29.5 of the RBI's Master Direction on Interest Rate on Deposits, 2025, allows banks to accept current account money only as interest-free deposits. Every scheduled commercial bank is bound by it identically. So the competitive levers between banks are the MAB, the charges, the transaction tools and the sweep facilities — never the headline rate, because there isn't one.

Who Needs One

Entity	Current Account?
Companies / LLPs	Practical necessity
Partnerships	Practical necessity
Sole proprietor	Recommended, not required
Professional (high volume)	Recommended
Salaried individual	No

RBI does not stop an individual resident from opening a current account — a sole proprietor operating under their own name is the classic case, and banks then ask for business proof (GST certificate, trade licence, professional registration). But for anyone without business-scale transaction volumes, it is the wrong account.

GST: Not a Requirement

The GST portal accepts a savings, cash-credit or current account in the registered person's name. Bank details aren't even needed at application — they must be furnished within 45 days of registration under Rule 10A of the CGST Rules, or before the first GSTR-1, whichever is earlier, and up to 10 accounts can be linked. A current account is the practical choice for companies and partnerships, but never a legal condition of GST.

Appropriate: a private limited company settling dozens of vendor and payroll payments a week; an exporter receiving ITC refunds and FX inflows; a consultant with heavy client-payment volumes. Inappropriate: a salaried professional with a side income of a few transactions a month — a savings account does that job and pays interest while it's at it.

Part II

Minimum Balances, Charges, and Solving the Zero-Interest Problem

Why current-account minimum balances run far higher than savings accounts and how non-maintenance charges bite; and how auto-sweep FDs and liquid funds convert idle, zero-earning float into a return without surrendering on-demand liquidity.

Part II · Page 6

Minimum Average Balance

Variant	Typical MAB
Basic PSB (small town)	~₹5,000
Standard private (metro)	₹25,000–₹50,000
Premium / trade-linked	₹1,00,000+
Startup / neo-bank	₹0

Non-Maintenance Charges Bite

Banks set MAB independently — by bank type, city tier and account variant — and it is far higher than for savings accounts. Fall below the required monthly average and the bank levies a Non-Maintenance Charge: a flat monthly fee or a percentage of the shortfall. Always compare the full cost — MAB + transaction fees + NMC structure — against the operational benefits before choosing.

The MAB Workaround

A linked sweep-in FD usually counts toward the MAB requirement — so even a modest FD can satisfy the minimum while earning interest. Early-stage businesses can instead pick a zero-MAB product outright.

The Zero-Interest Problem

The Opportunity Cost Is Real

A ₹50 lakh average balance held for a year forgoes roughly ₹3.5 lakh against a 7% one-year FD — money left on the table for no operational reason. It is invisible because no statement shows it, which is precisely why it persists.

Auto-Sweep FDs — The Fix

Surplus above a set threshold moves automatically into a short-tenor FD and sweeps back on demand when the balance dips. SBI offers a sweep-in FD on current and savings accounts. IDFC FIRST's Super Account auto-sweeps into 90-day FDs and creates an overdraft equal to the FD, preserving full liquidity with no premature-withdrawal penalty. HDFC SmartUp bundles sweep and overdraft for eligible businesses.

Liquid Funds for Treasury

Larger surpluses (typically ₹25 lakh+) often sit in liquid mutual funds, currently ~6.3–6.5% p.a., redeeming the next business day. For 30%-bracket businesses the daily marking-to-market and convenience make them the preferred treasury home at scale — though short-term gains are taxed at slab rate.

The discipline: decide the minimum working balance the account genuinely needs, and sweep everything above it. The choice between a sweep-in FD and a liquid fund is one of size and access — FDs for steadier reserves that fit the MAB, liquid funds for larger, more dynamic treasury. Leaving surplus at zero is the one option that is never right.

Part III

Overdraft and Cash Credit, Cash-Deposit Reporting, and Startup Accounts

The working-capital credit a current account unlocks and how OD and CC differ in structure and cost; the reporting and penalty thresholds that govern cash deposits; and the deductibility of interest and charges, plus the zero-MAB products built for new businesses.

Part III · Page 8

Overdraft vs Cash Credit

Facility	Secured By	Rate
OD vs FD	The FD	FD + 1–2%
Unsecured OD	Creditworthiness	12–18%
Cash Credit	Stock / receivables	~9–13%

The most valuable feature of a current account is the credit it unlocks. An overdraft lets the account run negative up to a sanctioned limit, with interest charged daily only on the drawn amount — cheapest when secured against an FD (banks lend 75–95% of FD value). A cash credit is a revolving line in a separate account, secured against hypothecation of stock or book debts and benchmarked to the bank's repo-linked lending rate. Interest on both is a deductible business expense.

The 2026 Chapter XIA Update

From 1 April 2026, revised RBI guidelines let a bank maintain a current or OD account for a borrowing entity only if it holds at least a 10% share of the banking system's fund-based exposure to that borrower, and term-loan disbursals must go directly to the beneficiary rather than route through the current account. This mainly affects large corporate relationships; the impact on MSME and small-business accounts is minimal.

Cash Deposits: Thresholds That Matter

Trigger	Threshold	Rule
SFT report	₹50 lakh/yr	Rule 114E
PAN required	₹50,000 single	Form 60 else
269ST penalty	₹2 lakh cash	100%
Section 68	Unexplained	~83% effective

There is no cap on cash deposits, but reporting follows. Banks file an SFT with the tax department for cash deposits (and withdrawals) aggregating ₹50 lakh or more a year — five times the ₹10 lakh savings-account threshold — feeding your AIS. Cash inconsistent with declared turnover can be taxed as unexplained cash credit under Section 68; deductible against it, OD/CC interest and all bank charges reduce business income under Section 37(1). There is no interest income and so no 80TTA/80TTB angle at all.

Startup & Neo-Bank Accounts

IDFC FIRST Super Account, HDFC SmartUp, ICICI iStartup — zero or low-MAB current accounts bundling overdraft, sweep and digital onboarding. RazorpayX, Open, Cashfree Payouts are not banks but business-banking layers on partner-bank licences; deposits stay DICGC-insured, the interface is a dashboard. They suit API-first businesses over branch access.

Part IV

The Verdict

Run the account well. Never store wealth in it.

Part IV: The Verdict · Page 10

30-Second Summary

A current account is the standard business operating account in India: a demand deposit with unlimited transactions, higher minimum balances, and access to overdraft and cash-credit working capital. Its defining feature is that it pays no interest — a prohibition under the RBI's Master Direction on Interest Rate on Deposits, 2025, not a bank's decision. Deposits are DICGC-insured to just ₹5 lakh per bank, and cash deposits aggregating ₹50 lakh a year are reported to the tax department under Rule 114E.

Because balances earn nothing, the single most important habit is to sweep idle float into auto-sweep FDs or liquid funds — a persistent ₹50 lakh left in the account forgoes roughly ₹3.5 lakh a year. It is not a GST requirement, not a savings vehicle, and not a safe home for large idle cash. Judge it on throughput, credit access and tooling; deduct the OD/CC interest and charges under Section 37(1); and keep cash deposits fully documented so they never invite Section 68 scrutiny.

"The account answers one question — can I move my money at will, at volume, on credit when I need it? Yes. It answers a second question ruthlessly — will this balance earn anything? No, never. A current account is the finest operating account a business can hold and the worst place to leave money sitting. Confusing the two is the only real mistake."
The Final Orientation

The Bottom Line: Use a current account as the operating hub of a business — for its unlimited transactions, its overdraft and cash-credit lines, and its cash-management tooling. Prefer a zero-MAB startup product or a sweep-linked account so the minimum balance never becomes dead money. Sweep every rupee of surplus above your working minimum into an FD or liquid fund; leaving it at zero interest is the one avoidable loss. Keep no more than ₹5 lakh of genuinely idle cash at any single bank, document every cash deposit against turnover, and claim your OD/CC interest and bank charges as deductions. Run the plumbing well; keep the wealth elsewhere.

ADWIZR · July 2026

Decision Rules

Use Correctly As

✓ A business operating hub

✓ A gateway to OD / cash credit

✓ A sweep-linked, low-MAB account

✓ Clean, documented cash flow

Misuse Wastes Value

✕ Parking savings at zero interest

✕ Holding large uninsured cash

✕ Mixing personal & business money

✕ Opening one "because of GST"

Three Misconceptions

What Business Owners Get Wrong

(1) "Some current accounts pay interest." None can — it is an RBI prohibition; any "interest" is a linked sweep. (2) "GST needs a current account." No — a savings account is accepted on the portal. (3) "My money is safe in there." Only ₹5 lakh is DICGC-insured per bank; balances above that are exposed.

vs a Savings Account

Move Money vs Store It

Current: zero interest, higher MAB, unlimited high-volume transacting, OD/CC access — built for a business. Savings: pays interest, low MAB, everyday personal use, 80TTA/80TTB relief — built for an individual. Different accounts for opposite jobs.

Zero

Interest

RBI-mandated

Unlimited

Transactions

High-volume use

₹5L

DICGC insured

Per bank

Business FAQ

Questions Business Owners Ask

Six questions, answered directly.

Business FAQ · Page 12

Frequently Asked Questions

Q1 Do current accounts pay any interest?

No — and this is a regulatory prohibition, not a bank's choice. The RBI's Master Direction on Interest Rate on Deposits, 2025, states that current account balances may only be accepted as interest-free deposits. No bank in India — public sector, private or small finance — can legally pay interest on a current account. There is no such thing as a high-interest current account. The only way to earn a return on idle current account cash is to sweep it into a linked FD or a liquid fund via an auto-sweep arrangement.

Q2 Is a current account mandatory for a GST-registered business?

No. The GST portal accepts a savings account, cash credit account, or current account — any bank account in the registered person's name. Bank details are not even required when you apply; they must be furnished within 45 days of registration under Rule 10A of the CGST Rules, or before filing the first GSTR-1, whichever is earlier, and up to 10 accounts can be linked. For a sole proprietor a savings account works on the portal. For companies, LLPs and partnerships with real transaction volumes, a current account is the practical requirement even though it is not a legal one.

Q3 What is the difference between an overdraft and a cash credit?

Both are working-capital facilities but differ in structure. An overdraft lets a current account go negative up to a sanctioned limit — typically shorter-term, secured against an FD or property, or offered unsecured on the strength of the banking relationship. A cash credit is a revolving line held in a separate CC account, secured against hypothecation of stock or receivables and benchmarked to the bank's repo-linked lending rate. CC is generally cheaper than unsecured OD (roughly 9–13% versus 12–18%) because it is secured and structured; interest on either is charged only on the amount actually drawn.

Q4 Can I run my business from a savings account instead of a current account?

Technically yes — the GST portal and most payment rails accept savings accounts. In practice it creates three problems. First, mixing personal and business cash flows complicates accounting and raises income-tax scrutiny risk, since unexplained credits in a savings account attract Section 68 attention. Second, although the RBI removed the free-transaction cap on savings accounts in April 2020, banks still flag savings accounts showing business-like patterns. Third, you cannot access overdraft or cash credit on a savings account. For any business beyond a very small scale, a separate current account is the right operating choice.

Q5 How do I avoid the minimum average balance penalty on my current account?

Most banks offer auto-sweep or sweep-in FD arrangements in which the linked FD balance counts toward the MAB requirement — so a small linked FD can satisfy the minimum while simultaneously earning FD-level interest. Alternatively, choose a zero-MAB current account product aimed at early-stage businesses, such as the IDFC FIRST Super Account, HDFC SmartUp, or ICICI iStartup. Neo-banking platforms built on partner-bank licences also typically offer zero-balance arrangements. Always weigh total cost — MAB, non-maintenance charges and transaction fees — against the operational benefits before choosing.

Q6 What happens if I deposit large amounts of cash into my current account?

The bank must report aggregate cash deposits (and withdrawals) of ₹50 lakh or more in a financial year to the Income Tax Department via the Statement of Financial Transactions (SFT) under Rule 114E — five times the ₹10 lakh threshold that applies to savings accounts. This appears in your Annual Information Statement (AIS), where the department cross-references it against your declared turnover and GST returns. Cash deposits inconsistent with declared income can trigger scrutiny under Section 68 as unexplained cash credits, taxed at an effective rate above 80%. Always support cash deposits with sales records, cash memos and books of accounts, and remember that receiving cash above ₹2 lakh in a day attracts a 100% penalty under Section 269ST.

Key Terms & Definitions

Current Account

A demand deposit account designed for businesses and high-frequency transactors. Funds move in and out at any time without notice, transactions are unlimited, and overdraft/cash-credit facilities are available — but the account pays no interest, by RBI regulation.

Minimum Average Balance (MAB)

The average balance a bank requires you to maintain over a month. For current accounts it runs far higher than for savings — from around ₹5,000 to ₹1 lakh or more — and falling below it triggers a Non-Maintenance Charge.

Auto-Sweep FD

A facility that automatically moves current-account balances above a set threshold into a short-tenor fixed deposit, and sweeps them back on demand when the balance falls. It captures FD-level interest on idle float while preserving on-demand liquidity.

Overdraft (OD)

A sanctioned limit up to which a current account may run negative. Interest is charged daily only on the amount drawn. Cheapest when secured against an FD (FD rate + 1–2%); costlier when unsecured (12–18%).

Cash Credit (CC)

A revolving working-capital line in a separate account, secured against hypothecation of stock or receivables and benchmarked to the bank's repo-linked lending rate. Effective rates run roughly 9–13% for established businesses.

SFT (Statement of Financial Transactions)

A report banks file with the Income Tax Department under Rule 114E for high-value transactions — including cash deposits and withdrawals aggregating ₹50 lakh or more a year in a current account. It feeds the taxpayer's Annual Information Statement.