In a bid to improve ease of doing business in India, the Ministry of Corporate Affairs (MCA) is looking to provide companies with a bank account as soon as their registration processes are completed.
According to Business Standard (BS), the recent decision from the ministry is aimed at improving India’s position on the World Bank’s ease of doing business index, especially towards the incorporation of a business in India.
For its ease of doing business index, the World Bank ranks countries on 10 parameters and starting a business is one of them. In the recent overall rankings of World Bank, India jumped 14 places to 63. However, in the parameter of starting a business, India was ranked 136 out of 190 countries.
As of now, four banks have partnered with the MCA for providing bank accounts to startups and companies at the time of their incorporation. Moreover, the government has also asked all public sectors to join MCA’s new scheme.
Currently, upon registration, the government provides a company with a director identification number (DIN), permanent account number (PAN), tax deduction and collection account number (TAN), among other necessary documents required.
However, for a bank account, a company had to approach a bank on its own, undergoing all the formalities. But now, with the recent decision, a company will directly get its bank account along with the registration process which otherwise would have taken three or four more days.
It is estimated that around 1.2 Mn companies and limited liability partnerships are incorporated every year in India.
Moreover, providing a bank account on the day of incorporation will also help a company to transfer its capital and file the official documents for the commencement of business with the Registrar of Companies (RoC). The decision from the government is also expected to ease the compliance with Know Your Customer (KYC) norms of the banks.
According to a recent study, “Entrepreneurial India” by the IBM Institute for Business Value and Oxford Economics, it was found that 90% of Indian startups fail within the first five years. One of the main reasons for failure is a complex regulatory environment, thereby affecting the ease of doing business in the country. However, initiatives like providing bank accounts at the time of registration might help to improve this scenario.