Making Business Easy with Nodal Account

According to the Reserve Bank of India (RBI) guidelines, nodal accounts are mandatory for e-commerce websites. An online seller receiving money on behalf of the actual merchant must credit the same in these accounts. The RBI does not allow e-commerce websites to combine their sales proceeds with those received on behalf of other merchants.

This is because in case the actual merchant fails to deliver the products as per the customer preference, the e-commerce website is able to use the funds held in these accounts to refund the money. Furthermore, such types of accounts are required for e-wallets and payment service companies. The RBI guidelines state that all companies that hold money on behalf of third parties must maintain such accounts with a bank.



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Both the vendors and the customers are completely secured with these current banking accounts. All discrepancies are easily detected and rectified because these accounts have to be audited. The intermediaries cannot control the flow of funds unless complying with all the legal regulations.

Maintenance of such accounts

Nodal accounts are special purpose accounts that are opened for the co-ordination of particular types of transactions. In India, these are generally used for holding third party amounts for settlements for e-commerce, payment service providers, and e-wallets. The primary purpose is to pool revenues from different buyers and facilitate the payouts to the vendors later. According to the RBI guidelines, following are the permissible debits and credits allowed from such accounts.

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1. Debits

• Payments to the different service providers or vendors
• Commissions to various intermediaries. These must be at pre-determined rates and at specific intervals
• If a pre-determined agreement exists, transfers to other banks provided the receiving accounts are nodal bank accounts for the intermediaries
• Refund transactions in case of disputed or failed orders

2. Credits

• If a pre-determined agreement exists, transfers to other banks provided the receiving accounts are nodal bank accounts for the intermediaries
• Refund transactions in case of disputed or failed orders
• Revenue receipts from different users made for purchasing goods and services

Settlement

Final settlements of funds maintained in these current accounts must adhere to the business practices adopted by the intermediaries or merchants. The RBI guidelines make it necessary for the account holders to transfer funds to the beneficiaries with the minimum delay in order to increase the efficiency of transactions. The settlement cycle is as follows

• Payments to merchants where the nodal banks are involved are completed within three days from T, which is the transaction date (T+3 cycle)
• All payments that do not involve nodal account banks must be settled within two days from the date of intimation of the transaction completion (T+2 cycle)

The number of users in India opting for online shopping and bill payments through the Internet is expanding rapidly. This has increased the need for intermediaries like payment gateway service providers and aggregators. This sector has no entry barriers and the number of players in the market is increasing. As a result, users are prone to high risks because most of these service providers are untested. To prevent frauds and reduce the risks, the RBI has provided stringent guidelines for the maintenance of current accounts to hold funds payable to third parties.