What Is A Current Account And What Are Its Characteristics?

The current account is very popular. Every commercial bank maintains current account for its customers. A current account is a running account which is continuously in operation by the customers on all working days of the bank. The customers can withdraw the current deposits without previous notice to the bank. The bank has to honor the cheques provided they are within the limits of the account. The customers who need a liquid balance maintain current deposits in banks. In current account the baker incurs an obligation to honour al cheques drawn by the customer so long as there is enough money to the credit of the customer. The obligation may be extended by an agreement to the amount of overdraft agreed upon between the banker and the customer.

The banks do not usually pay any interest on these deposits as they can be withdrawn without notice. The bank here acts only as the custodian of money. It cannot employ these funds due to fear of withdrawal. It has to keep a higher reserve ratio to meet the demand liabilities. The current accounts are becoming very popular with the commercial banks in recent years. The current account is opened and operated by traders, business companies, institutions, public service bodies and industrialists who wish to have working capital in their custody.

Outline the charecteristics of a current account

Commercial bank is required to maintain current account for its customers. A current account is a running account which is continuously in operation. It is used by a customer to transfer money or to withdraw deposits on demand. The current accounts of the customers are maintained in a current account ledger by the bank. The customers can withdrawn the current deposits without previous notice to the bank. The bank has to honor the cheque provided they are within the limits of the account. The customers who need a liquid balance maintain current deposits in bank.

The bank usually does not pay any interest on these deposits as they can be withdrawn without notice. The bank here acts only as the custodian of money. If cannot employ these funds due to fear of withdrawal. It has to keep a higher reserve funds to fear of withdrawal. It has to keep a higher reserve ratio to meet the demand liabilities.

The current deposits are becoming very popular with the commercial banks in recent years. The customers can transfer huge amounts of money by drawing cheque on the parties. They can also get overdraft facilities with previous arrangements with the bankers. To open an account to need a minimum amount.