JAIIB PPB Module A Chapter 4 Part 2: Types of Bank Accounts for Business

JAIIB PPB Module A Chapter 4 is where many candidates either lock in easy marks or lose them to confusion. This chapter explains how banks open. Operate accounts for different business entities in India.

In Part 2. The focus shifts from individuals to organisations: Hindu Undivided Families. Sole proprietorships, partnership firms, Limited Liability Partnerships and companies.

This 2026 guide rewrites the topic into a clean, exam-ready resource. You will learn the legal structure. Liability rules, account type and documentation for every entity.

Each section is short. Scannable. Built to help you score in the Principles.

Practices of Banking paper.

Why JAIIB PPB Module A Chapter 4 Part 2 Matters

Banking is not only about individuals. A huge share of deposits and lending flows through businesses. As a banker. You must know who can legally operate an account. What protects the bank if things go wrong.

That is the heart of this chapter. The exam tests whether you understand entity structure, liability and the right set of account-opening documents. Get these basics right and you build a strong base for the rest of the free guides in this paper.

Below. Every entity is broken down the same way: what it is. How liability works. Which account it uses and what documents the bank needs.

1. HUF (Hindu Undivided Family) Accounts

A Hindu Undivided Family is a unique legal structure recognised under Hindu law. It is not created by a contract. A person becomes a member simply by being born into the family.

Structure and the Role of the Karta

The family is managed by the Karta, usually the senior-most member. Other members are called coparceners. The Karta makes decisions. Operates the account on behalf of the whole family.

• Ancestral property is held and managed jointly by the family.
• The Karta signs and operates the account. Often with a letter from all adult coparceners.
• Minors can be coparceners, but they do not operate the account.

Liability in an HUF

This is a favourite exam point. The Karta has unlimited liability. Coparceners are liable only up to their share in the joint family property. Not from their personal assets.

2. Sole Proprietorship Accounts

A sole proprietorship is the simplest business form. One person owns and runs the business. In law, the owner and the business are the same.

Ownership, Liability and Account Type

• Liability: unlimited. The proprietor's personal assets are exposed to business debts.
• Account type: a current account in the trade name. A savings account is generally not allowed for the business.
• Control: the proprietor alone operates the account.

Documents a Bank Needs

To open the account. The bank verifies the identity of the proprietor. The existence of the business. Two valid documents in the firm's name are commonly required, such as:

• KYC of the proprietor (identity and address proof).
• GST registration, Shops and Establishment certificate, or a trade licence.
• Any tax or registration document issued in the firm's name.

3. Partnership Firm Accounts

A partnership firm is formed when two or more persons agree to share the profits of a business. It is governed by the Indian Partnership Act, 1932.

Liability and the Partnership Deed

Partners have joint and several liability. Each partner can be held responsible for the firm's full obligations. Including from personal assets. The relationship is set out in a partnership deed.

• The bank obtains the partnership deed. A partnership letter signed by all partners.
• The deed states who can operate the account. Borrow on the firm's behalf.
• A new partner is not liable for acts before joining. A retiring partner must give public notice to end future liability.

4. Limited Liability Partnership (LLP) Accounts

An LLP blends a partnership with a company. It is governed by the LLP Act. 2008 and is a separate legal entity from its partners.

Why an LLP Is Different

• Limited liability: partners are liable only up to their agreed contribution.
• Perpetual succession: the LLP continues even if partners change.
• Registration: it is registered with the Registrar of Companies. Has an identity number.

Documents for an LLP Account

The bank typically asks for the Certificate of Incorporation. The LLP Agreement. KYC of designated partners. A resolution naming the partners authorised to operate the account.

Think of an LLP as a team where each member risks only what they put in. Not their entire personal wealth.

5. Company Accounts: Private, Public and OPC

A company is an artificial legal person created under the Companies Act, 2013. It is fully separate from its shareholders and directors. With its own rights and obligations.

Types of Companies

• Private Limited Company: restricts the transfer of shares. The number of members.
• Public Limited Company: shares can be freely transferred. Offered to the public.
• One Person Company (OPC): a single promoter enjoys company-style limited liability.

Core Documents and Operation

To open a company account. The bank relies on a clear set of legal documents:

• Certificate of Incorporation.
• Memorandum of Association (MOA) and Articles of Association (AOA).
• A Board Resolution authorising the account and naming signatories.
• KYC of directors and the authorised signatory card.

Key principle: only persons named in the Board Resolution can operate the account. This protects both the company and the bank.

Quick-Reference Comparison Table

Use this table for fast revision the night before the exam. It captures the points most likely to appear in objective questions.

Documentation and Operational Guidelines

Every entity shares a common documentation backbone. Strong documents protect the bank. Keep the account compliant with KYC and AML rules.

• KYC: identity and address proof of all signatories.
• Constitution proof: deed, agreement, MOA or AOA, as relevant.
• Authority to operate: a mandate, resolution or partnership letter.
• Declarations: beneficial ownership and operational instructions.

Pro tip: Keep a simple checklist and verify each document before submission. This single habit prevents most account-opening delays.

How to Study This Chapter for the Exam

You do not need to memorise everything. You need a smart, repeatable method. Follow these steps.

1. Learn the structure first. Understand what each entity is before touching documents.
2. Master liability. Most questions test who pays and how much.
3. Link each entity to its law and account type. Use the table above.
4. Drill with practice questions. Attempt mock tests to lock in recall.
5. Revise the table on the final day. It covers the high-yield points.

Common Mistakes to Avoid

These errors quietly cost marks. Avoid them and you instantly improve your score.

• Confusing LLP with partnership. An LLP has limited liability; a partnership does not.
• Allowing a savings account for a proprietary or partnership business.
• Ignoring the Board Resolution for company accounts.
• Forgetting public notice when a partner retires.
• Mixing up MOA and AOA. The MOA defines objects; the AOA defines internal rules.

Frequently Asked Questions (FAQ)

Who can open and operate an HUF account?

An HUF account is opened in the family name. Operated by the Karta. Usually with the consent of adult coparceners. The Karta acts on behalf of the entire family.

Can a sole proprietorship open a savings account?

No. A proprietary business normally uses a current account in the trade name. Savings accounts are meant for individuals, not for business turnover.

What is the main difference between a partnership and an LLP?

In a partnership, partners have unlimited liability. In an LLP. Liability is limited to the agreed contribution. The LLP is a separate legal entity.

Which documents are essential for a company account?

The bank needs the Certificate of Incorporation. MOA. AOA, a Board Resolution and KYC of the directors and authorised signatories.

Is this chapter important for the JAIIB exam?

Yes. Entity types. Liability. Documentation are recurring themes in the Principles and Practices of Banking paper. Master them with regular revision and practice.

Conclusion: Turn This Chapter Into Guaranteed Marks

JAIIB PPB Module A Chapter 4 Part 2 is scoring once you understand the pattern. Each business entity has a clear structure. A defined liability rule. A specific account type and a fixed document set.

Revise the comparison table, avoid the common mistakes and test yourself often. Small, consistent steps build real confidence. Study with focus. Practise with purpose, and walk into the exam ready to win.

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