You are a founder and you’ve just incorporated a company but you’ve no idea which bank you should open your current account at, then this article will help you decide.
As a consultant, I have worked with a variety of startups from education to health industry and I have worked with all major banks. One of the most commonly asked questions for me after a company is incorporated is, ” where do you recommend to open the current account for our company?”
The Bitter Truth: Banks do not care for startups because most startups fail
To begin with, I had looked up online 4 years ago while I had to open a current account. People often tend to believe everything they see on the internet and most of the times, it is misleading. Back then, it appeared people had the perception where Private Indian Banks have better service than Government Banks. But do I think that holds true today? That’s a resounding no, almost every major bank’s customer service is equally good and the only difference is in Average Balance that you are required to maintain for your current account.
Here are my 4 tips To Help You Find The Ideal Bank For Your Startup
1. Get a current at the bank where you have the lowest minimum balance to be maintained – typically this is about INR 10,000.00 at all Government owned banks and it's INR 25,000.00 at all private run banks.
In other words – Stay away from banks that require you to maintain a higher minimum balance because you will need the funds as a startup and you don’t want to lock your funds right from the beginning or waste your money paying penalties for not maintaining a minimum balance.
My pick here is any nationalized government owned bank. Why? Because they are in fact startup friendly as they have significantly lower requirement to maintain minimum balance when compared to Private Banks and also their charges are quite considerate and business friendly.
That being said – Before you choose the right nationalized government bank, check for the option for International Business Debit Card availability (You will need it even if you’ve never traveled abroad) and Internet banking facility – SBI is fantastic here, hands down although their mobile apps are a letdown!
2. Choose the branch where you get to speak to the branch manager of the bank.
So you’ve decided the bank and now you want to open an account at a location. Now before you jump in, take time to visit and try to develop a personal relationship with the bank manager because that will take you a long way later when you want to grow your business. If the manager isn’t available, come back with an appointment and have a chat about your startup.
If the manager is never available or a sales agent tries to open your account entirely without having to speak to the manager, that is red a flag. Try another branch before you commit your time because on many instances personally, that has been a problem later.
My rule of thumb – don’t do business if the business head doesn’t make you time when asked for an appointment.
3. Stay a mile away from any promotions that shout Zero Balance Current Accounts
I feel this is all mostly fiction or if they do exist, they are only exclusively available at select branches which these banks do not mention anywhere. So what exactly is it? It’s a lead generation tactic for the sales team of the bank.
I’ve lately seen a rise in these spam emails from ICICI Bank and HDFC Bank sending unsolicited emails as soon as your company is incorporated telling you they have a Zero Balance Account for start-ups. I’ve still not found a single branch where these bank officials were aware of such promotions.
In fact, stay a few miles away from any such banks because, at the end of the day, those banks end up charging more fees than a regular current account.
4. Lastly, remember to read the fine print.
Current accounts do not earn you interest and can incur penalties for not maintaining the minimum balance.
Make sure that you’ve understood the annual fee, Debit Card Fee, penalties before you sign up because this is where it makes a difference for a startup.
Bonus tip – Customer service and dedicated account manager is absolutely irrelevant for a startup and all you need is a current account to get going. Do not worry about all that as long as you have the lowest minimum balance to maintain as you don’t want to lock your limited funds.
That being said, keep those fancy overseas banking services options open for future when you thrive! That’s it for now, congratulations on your new company and good luck!
I would love to hear your experiences running your startup current account, tweet me @iAshishPrasad