Bank Account Opening Issues After Company Registration
One of the first things every new company needs is a business current account. Without it, you cannot receive payments professionally, pay vendors, process payroll, or integrate payment gateways. But many founders face unexpected rejections or delays when applying for a business bank account. This guide explains why banks reject business account applications, what you can do to avoid rejection, and which banks are most startup-friendly.
Why Banks Reject Business Account Applications
1. Incomplete or Incorrect Documentation
The most common reason for rejection is missing or inconsistent documents. Banks have strict KYC requirements for business accounts, and even minor gaps lead to rejection:
- Board Resolution not properly drafted or missing director signatures
- MOA/AOA copies not clear or not matching the MCA website records
- Director KYC documents expired or names not matching across documents
- Company PAN card photocopy instead of the original or MCA-generated PAN
- Registered office address proof documents older than 2 months
2. Address Verification Failure
Banks often physically verify the registered office address or cross-check it with MCA records. Rejection happens when:
- The address on documents does not match the ROC-registered address
- The premises are not accessible during the bank's verification visit
- No signboard or indication of business activity at the address
- Virtual office address not recognized by the specific bank
3. High-Risk Business Category
Banks maintain a list of high-risk business categories where they apply extra scrutiny or outright decline account opening:
| Risk Level | Business Types | Bank Response |
|---|---|---|
| Low Risk | IT services, consulting, manufacturing, retail | Usually approved without issues |
| Medium Risk | E-commerce, fintech, real estate, education tech | Additional documentation may be required |
| High Risk | Cryptocurrency, forex trading, online gaming, NBFC | Often rejected or requires senior approval |
| Very High Risk | Cash-intensive businesses, money transfer, shell companies | Usually rejected |
4. Director Creditworthiness Issues
Banks check the CIBIL scores and credit histories of all directors. Issues that can cause rejection:
- Low CIBIL score (below 600) for any director
- Existing loan defaults or write-offs against a director
- Director listed in RBI's defaulter database
- Director associated with other companies that have compliance issues
5. Company Too New or No Business Activity
Some banks are reluctant to open accounts for very new companies (incorporated within the last 3 to 6 months) with no visible business activity. They perceive these as potential shell companies or high risk for money laundering.
How to Get Your Business Account Approved
Document Preparation Checklist
| Document | Details to Verify |
|---|---|
| Certificate of Incorporation | CIN, date of incorporation, company name must be current |
| Company PAN Card | MCA-issued PAN; name must match exactly as on CIN |
| MOA and AOA | Clear copy; should match MCA records |
| Board Resolution | Dated, signed by all directors, specifies bank name and authorized signatories |
| Director PAN Cards | All directors; names must match DIN records |
| Director Aadhaar Cards | All directors; current address proof |
| Director Photographs | Recent passport-size photos |
| Registered Office Proof | Utility bill (within 2 months) + NOC or rental agreement |
| GST Certificate (if available) | Active GST registration showing the company's GSTIN |
Drafting the Board Resolution
A proper Board Resolution for account opening should include:
- Date and place of the Board Meeting
- Names of directors present
- Resolution to open a current account at [Bank Name], [Branch]
- Names and designations of authorized signatories
- Scope of authority (signing cheques, operating net banking, managing debit cards, etc.)
- Signatures of all directors present
Best Banks for Startup Current Accounts
| Bank/Platform | Minimum Balance | Best For | Processing Time |
|---|---|---|---|
| ICICI Bank | Rs. 10,000 to Rs. 25,000 | Established startups, strong support | 3 to 5 days |
| HDFC Bank | Rs. 10,000 to Rs. 25,000 | Wide branch network, good API integrations | 3 to 7 days |
| Kotak Mahindra | Rs. 10,000 to Rs. 25,000 | Good digital banking features | 3 to 5 days |
| RazorpayX | Zero or low | Tech startups, payment gateway integration | 1 to 2 days |
| Open (Banking Platform) | Zero | Early-stage startups, expense management | 1 to 3 days |
| SBI | Rs. 5,000 to Rs. 10,000 | Government dealings, lowest minimum balance | 5 to 10 days |
Digital-first banking platforms like RazorpayX and Open are often the best choice for newly incorporated startups. They have faster onboarding processes, lower minimum balance requirements, better API integrations, and are more receptive to companies with no business history. They work with partner banks (like RBL, YES Bank) to provide the actual banking infrastructure.
What to Do If Your Application is Rejected
- Ask for the specific reason: Request the bank to provide the exact reason for rejection in writing. This helps you address the issue precisely
- Fix documentation gaps: If it is a document issue, correct the specific documents and reapply
- Try a different bank: Each bank has different risk assessment criteria. If one bank rejects, another may approve
- Start with a neo-bank: If traditional banks are difficult, start with RazorpayX or Open to get operational quickly
- Get a reference: If you have a CA or CS who has a relationship with a bank branch, their introduction can help
- Address credit issues: If director CIBIL is the problem, consider adding a director with a clean credit history or resolving outstanding credit issues
Tips for Smooth Account Opening
- Visit the branch in person: While online applications are possible, visiting the branch with all documents often results in faster processing
- Bring original documents: Banks want to verify originals against copies
- Prepare a brief business description: A one-page write-up about your business, target market, and expected transaction volumes helps the bank understand your company
- Start with a single account: Get one account operational first before applying for multiple accounts
- Maintain initial activity: After opening, make a few transactions within the first month to show the account is active
- Set up net banking immediately: This makes day-to-day operations easier and shows the bank that the account is being used actively
Conclusion
Getting a business bank account is a critical early step after company incorporation. Most rejections are preventable by preparing complete documentation, drafting a proper Board Resolution, and choosing a bank that is receptive to new businesses. If traditional banks pose challenges, neo-banking platforms provide a fast, practical alternative to get your company operational while you build the business history that traditional banks want to see.
IncorpX assists clients with bank account opening as part of our post-incorporation support. We prepare the Board Resolution, organize all documents, and coordinate with our banking partners to ensure smooth account opening.
Frequently Asked Questions
Why did the bank reject my company's current account application?
Common reasons include: incomplete documentation (missing board resolution, MOA/AOA, or PAN), registered office address issues (address proof does not match ROC records), director KYC problems (expired ID proof, mismatch in names), low initial deposit, or nature of business concerns (high-risk sectors like cryptocurrency, lending, or forex).
What documents do I need to open a business current account?
Standard documents include: Certificate of Incorporation, PAN card of the company, MOA and AOA, Board Resolution authorizing account opening and naming authorized signatories, KYC documents of all directors (PAN, Aadhaar, photograph, address proof), registered office address proof, and the GST registration certificate (if available).
Can I open a business account before GST registration?
Yes, you can open a current account without GST registration. The Certificate of Incorporation, PAN, MOA/AOA, and director KYC documents are sufficient. GST registration is not a prerequisite for opening a business bank account, though some banks prefer to see it.
How long does it take to open a business current account?
Most banks process a business current account application within 3 to 7 working days if all documents are in order. Some digital-first banks (like RazorpayX, Open, Jupiter) can open accounts within 1 to 2 working days. Delays usually occur due to document verification, especially for new companies.
Can a newly incorporated company open a bank account?
Yes, newly incorporated companies can open current accounts. However, some traditional banks are hesitant to open accounts for companies that are less than 6 months old or have no business activity. In such cases, neo-banking platforms and private sector banks tend to be more accommodating.
What is the minimum balance for a business current account?
Minimum balance requirements vary by bank. PSU banks typically require Rs. 5,000 to Rs. 10,000 average quarterly balance. Private banks may require Rs. 10,000 to Rs. 25,000. Neo-banks often have zero or very low minimum balance requirements. Always check before applying to avoid penalty charges.
Can directors with CIBIL issues open a company account?
If a director has a low CIBIL score or existing defaults, some banks may reject the company's current account application. The bank sees directors' creditworthiness as a risk factor. Solutions include: appointing a director with a clean credit history, approaching a different bank, or using a neo-banking platform that focuses on the company's credentials rather than director credit scores.
What is a Board Resolution for bank account opening?
A Board Resolution is a formal decision recorded in the minutes of a Board Meeting that authorizes the company to open a current account and designates the authorized signatories. The resolution must specify: the bank name, type of account, names of authorized signatories, and the powers granted (signing cheques, operating net banking, etc.).
Can I open multiple current accounts for one company?
Yes, a company can open multiple current accounts at different banks. There is no legal restriction on the number of current accounts. However, each bank will do its own KYC and verification. Having multiple accounts helps with cash flow management, payment processing, and backup access.
Why do banks ask for a company website?
Some banks ask for a company website or online presence to verify the legitimacy and nature of the business. This is part of their KYC and anti-money laundering checks. If you do not have a website, providing social media pages, Google Business listing, or a brief business description letter usually satisfies this requirement.
