Current accounts - SS2 Commerce Lesson Note

A current account is a type of bank account that allows individuals and businesses to manage their day-to-day financial transactions. It is designed for frequent transactions and offers features such as check-writing, debit cards, and online banking.

To open a current account, you typically need to follow a few procedures. These may vary slightly depending on the bank, but generally, you would need to:

Choose a bank: Research different banks and compare their offerings, fees, and customer service to find the one that suits your needs.

Visit the bank: Go to the chosen bank branch and ask to open a current account. You may need to provide identification documents like your passport or driver's license, proof of address, and other personal information.

Fill out the application form: The bank will provide you with an application form to fill out. This form will ask for details such as your name, address, contact information, occupation, and source of income.

Submit required documents: Along with the application form, you'll need to submit the necessary documents requested by the bank, such as identification and proof of address.

Initial deposit: Some banks require an initial deposit to open a current account. The amount varies depending on the bank and the type of current account you choose. You may need to deposit this amount at the time of opening the account.

Account activation: Once your application and documents are verified, the bank will activate your current account. They will provide you with an account number, checkbook, and other account-related details.

Before granting a loan, a bank manager will consider several factors to assess the borrower's creditworthiness and ability to repay the loan. Some important factors they may evaluate include:

Credit history: The bank will review the borrower's credit history to assess their past repayment behavior and determine if they have a good track record of repaying loans and bills on time.

Income and employment stability: The bank will analyze the borrower's income source and stability of employment to ensure that they have a steady income that can support the loan repayment.

Debt-to-income ratio: The bank will calculate the borrower's debt-to-income ratio, which compares their monthly debt obligations to their monthly income. A lower ratio indicates a better ability to manage additional loan payments.

Collateral and security: Depending on the loan type, the bank may require collateral or security to mitigate the risk. Collateral could be assets such as property, vehicles, or other valuable possessions that the bank can claim in case of loan default.

Purpose of the loan: The bank will consider the purpose of the loan and assess whether it is for a valid and justifiable reason. They will evaluate if the loan amount is reasonable and if the borrower has a solid plan for utilizing the funds.

Repayment capacity: The bank manager will evaluate the borrower's repayment capacity by analyzing their financial statements, bank account statements, and other relevant financial documents. This helps the bank determine if the borrower can comfortably meet the loan repayment obligations.