Guide on zero balance current account for SMBs in India

Apr 05, 2024

To support business transactions and help them with storing business funds, current accounts are essential. There are multiple options available in India to set up current accounts.

But the major drawback is that they require the account holders to maintain a minimum balance. And that’s why enterprise users are keen to open zero balance current accounts.

They don’t have to limit their transactions to maintain the minimum balance. The benefits of zero balance current accounts are endless for smooth financial operations.

Small businesses, in particular, are relieved as they are limited in funds but have a lot of expenses to meet.

What is MAB (Monthly average balance) and how to calculate it?

The Monthly Average Balance is the minimum amount that account holders must maintain in their savings account. If the bank balance is lower than MAB, the account holder will be liable to pay penalties.

There is a formula to calculate MAB.

MAB = Sum of daily closing balance of a month/number of days in the month

To calculate the Monthly Average Balance to be maintained, you will have to add daily closing balances every day and divide them by thirty.

What is a zero balance current account?

A current account is a bank account that allows its users to deposit and take out money or make transactions through it.

Current accounts for businesses have certain standards when it comes to how you operate the money using it, i.e., transaction volumes, minimum balance, etc.

However, a current account with zero balance doesn’t have the limitation associated with using working capital. You don’t have to stick with maintaining the minimum balance.

But with zero balance current accounts, banks lose their major source of revenue. Hence, they might not offer you every benefit and feature that comes with regular current accounts.

So, the account that’s best for you depends on your business's financial situation

What should you know before opening a zero balance account?

Anyone can open zero balance current accounts. The following categories prefer opening current accounts with zero balance:

Registered companies (Public and Pvt Limited Liability)

Trust and educational institutions

Sole proprietors

Companies run on partnerships

You should be ready with the documents required to open zero balance current accounts. Though they vary from bank to bank, some common and general documents needed everywhere are,

Aadhar card, PAN card, Voter ID card, driving license, or passport to prove your identity.

For address proof, rental agreement, bank statement, driving license, or utility bills.

Passport size photograph

Other than the above, there are specific business-related documents,

Proprietorship documents and sales tax documents for sole proprietors.

Partnership deed for partnership firms

Articles of association and certificate of incorporation for registered companies

Trust deed, registration certificate, resolution by trustees

6 benefits of zero balance current accounts for startups

Every business owner in India should know the benefits of zero balance current accounts before they set up their bank accounts.

Though they might come with a maintenance cost and limited features, they can benefit you in the following ways:

1. Can keep business finances and personal expenses separate

Even if you start small, it’s a good practice to open zero balance current accounts or any business accounts for that matter. If you have a current account with minimum balance requirements, you can use it solely to handle business expenses.

But what if you run out of money and don’t have any outstanding payments from your customers? You will have to use up the minimum balance and incur a penalty fee or use your personal money from the personal account.

That goes against what we stated above about keeping finances separate. But when you have a current account with zero balance, you can use the money till its last penny.

2. Easy for transactions

When you open zero balance current accounts, you have the liberty to make transactions anytime from anywhere. There always will be a smooth flow of transactions as it’s easy to deposit and send/withdraw money without additional charges.

It’s easy to send money to your stakeholders and keep your business running smoothly. Your accountants won’t have to worry about following multiple steps to get a bill fully paid.

Without extra charges, your company can get the mobile banking facility and send money with a few clicks.

3. Get extra benefits

Other than general uses, there are many extra benefits of zero balance current accounts that go unnoticed.

Depending on the bank you opt for, this can include round-the-clock customer service, complimentary debit cards and checkbooks/passbooks, the ability to earn points with transactions, or even time-bound cashback offers.

4. No limitations for transactions

A few current accounts restrict businesses on the number of business transactions they initiate on a day. That’s not favorable if you are growing rapidly and have an inconsistent payment pattern.

But one of the impressive benefits of zero balance current accounts is unlimited transactions. SMBs benefit the most as they are not restricted to making transactions only up to a particular amount.

They are also not limited in the number of transactions they make in a day. You don’t have to keep a vendor waiting or a business function at a halt as you have exhausted the transaction count.

And it’s not just about online payments; it includes unlimited ATM withdrawals, NEFT, EMIs, etc.

5. Makes you look more professional

Your banking information may not be visible to your payment recipients. But they can view your account name and type. The same goes for writing cheques.

Imagine how unprofessional it would be when they receive money from a personal account. It will be irreparable damage to your business reputation if prominent vendors reject your payments or advice you to proceed with business accounts. 


In this case, the best way to have a separate account for business is to open zero balance current accounts. Payments with business names and information on labels make you look professional and trustworthy.

6. Cost efficient

Though a current account with zero balance comes with narrow features, it’s very light on your wallet. You won't incur any fee to open zero balance current accounts.

They don’t have limitations on the maximum number of everyday transactions. So, you can make unlimited transactions and not bother about penalty charges.

They also let you use the account to its maximum capacity and cut down the nominal penalty fee you might pay when you exceed MAB.

You can also use net banking for free and make ATM withdrawals at zero cost. This makes it a cost-efficient banking solution for SMEs and MSMEs.

Business accounting is easy with Volopay

So, you are aware of the benefits of zero balance current accounts. But as this term is relevantly new, it can be hard for you to find banks that offer the current account with zero balance that fits your needs and budgets. 


But there is one solution that will profit you in every way. Volopay offers expense management tools that include business accounts for small and medium-sized business owners.

Business accounts are suitable for storing money in a temporary wallet to pay off business expenses. A business account will also be useful for making transactions in quick foreign currencies at a low cost.

With a business account, you can store your business funds safely and face fewer headaches at a time. Process your salary, clear bills, make international payments, and store money in multi-currency wallets for payments in different currencies.


You don’t have to open zero balance business accounts as Volopay is there to empower you with its state-of-the-art business accounts and other accounting tools.

Related read- How to get startup business loan without collateral in India?

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