What is the Difference Between a Current Account and a Capital Account


While both types of accounts are used for financial transactions, they serve different purposes and have different features. Here are the key differences between a current account and a capital account-


A current account is primarily used for conducting day-to-day business transactions, such as making payments and receiving funds. On the other hand, a capital account is used for investment purposes, such as investing in shares, securities, and mutual funds.

Nature of Transactions

A current account is typically used for short-term transactions, while a capital account is used for long-term transactions. For example, a current account holder may use their account to pay suppliers for goods and services, while a capital account holder may invest in a stock for several years.

Interest Rates

Generally, current accounts do not earn any interest, whereas capital accounts do. This is because the funds in a current account are meant to be used for transactions, whereas the funds in a capital account are invested for a longer period.

Minimum Balance

Current accounts usually require a minimum balance to be maintained at all times, while capital accounts may or may not have a minimum balance requirement, depending on the bank.

Fees and Charges

Current accounts often have transaction fees, and other charges such as overdraft fees, while capital accounts may have fees associated with trading and managing investments.

Account Holders

Current accounts can be held by individuals as well as businesses, while capital accounts are primarily held by individuals for investment purposes.


In India, the interest earned on capital accounts is subject to income tax, while the funds in a current account are not.

Withdrawal Limitations

There are typically no restrictions on the number of transactions or withdrawals that can be made from a current account, whereas capital accounts may have restrictions on the number of withdrawals or transactions that can be made, depending on the type of investment.


Opening a current account requires minimal documentation, while opening a capital account requires more extensive documentation, such as proof of identity, proof of address, and proof of income.


Capital accounts offer greater flexibility than current accounts in terms of investment options, and allow individuals to tailor their investment portfolio to their specific needs and goals.

Risk and Return

Capital accounts typically offer higher returns than current accounts, but they also come with higher risks. This is because investments made through a capital account are subject to market fluctuations and may result in losses. In contrast, a current account offers lower returns but also lower risks since the funds are not invested in the market.

Overdraft Facility

A current account may offer an overdraft facility, which allows account holders to withdraw more funds than they have in their account, up to a pre-determined limit. In contrast, a capital account does not typically offer an overdraft facility.

Purpose of Investment

The purpose of the investment made through a capital account can vary. Some investors may choose to invest in a capital account for capital appreciation, while others may choose to generate a regular income from their investments. This is in contrast to a current account, which is primarily used for day-to-day transactions.

Account Features

Capital accounts may offer additional features, such as investment advice and research, that are not typically available with a current account. Some banks may also offer special benefits for capital account holders, such as priority customer service.

Withdrawal Restrictions

Depending on the type of investment made through a capital account, there may be restrictions on when and how much money can be withdrawn. For example, a mutual fund investment may have a lock-in period, during which the investor cannot withdraw their funds.

In conclusion, a current bank account for individuals and a capital account in India serve different purposes and have different features. A current account is primarily used for day-to-day transactions, while a capital account is used for long-term investments. While both types of accounts offer benefits, it is important for individuals to assess their financial needs and goals before deciding which type of account to open.

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