Trying to figure out what an escrow account in India is? Yes, we understand that this is a difficult situation.

After all, the rules and procedures governing an escrow account can differ from one region to the next. Furthermore, it is frequently confused with a nodal account.

So, in this blog, we will discuss:

  • In India, what does an escrow account mean?
  • In India, how do you open an escrow account?
  • Charges for escrow accounts in India

Why Is An Escrow Account Required in India?

You may require an escrow account if:

A large transaction (between two or more parties) that carries some legal obligations that must be met before the payment or asset is released.

Here's an illustration:

Assume you are a construction builder looking to sell apartments. Assume you want customers to reserve these apartments before they are ready to move in.

There are, of course, transaction risks.

The customer may not wish to pay the entire amount before taking possession.

Customers may be wary if pre-determined conditions are not met. There is a risk of scams (money being brought and redirected to other avenues).

Here’s where an escrow account in India steps in.

It reduces the risk of fraud as it acts as the third party between the two parties. Moreover, it helps control the cash flow between the two parties. 

Additionally, since September 2022, escrow accounts have become indispensable for co-lending use cases. 

According to the digital lending guidelines by RBI, all loan repayment and disbursement must be done directly between the bank account of the lender and the borrower. This means that no third-party pass-through account can be used by banks, NBFCs, or lending service providers (LSPs).

However, co-lending use cases are an exception to this rule. 
In other terms, co-lending players (like banks and NBFCs) can use escrow accounts to pool funds before disbursing to borrowers.

How Do You Open An Escrow Account in India?

The following is the procedure for opening an escrow account in India:

  1. Before opening the account, the buyer and seller agree on the terms and conditions of buying and selling assets. The "Escrow agreement" is what it's called.
  2. The buyer deposits the funds into the escrow account after reviewing and signing the agreement.
  3. The receipt is verified and validated by the escrow agent for both parties.
  4. The escrow agent regularly monitors the buyer's account to ensure that the buyer is paying the seller in accordance with the agreed-upon process.
  5. The assets under the escrow agent's control are released at the agreed-upon event or time if both parties respond positively.
  6. If the two parties cannot agree, the escrow account in India will be transferred to dispute resolution. The outcome of the dispute resolution process determines what happens with the escrow funds.

If you are a co-lender (NBFC or fintech), you can directly integrate with digital lending service providers such as Vouch Payments.

This allows you to integrate and go live in weeks.

Furthermore, Vouch's low-code APIs and dashboard access can aid in loan disbursement and collection.

Advantages of having an Escrow account

Secure and Safe

Because the funds are neutral with the third party agent, the buyer and seller will have protection for both their funds and the goods.


Escrow accounts are completely automated. This means that the funds are automatically transferred to the seller once all of the terms of the agreement are met.

Being in Compliance with RBI Guidelines

As previously stated, co-lending participants must maintain an escrow account in order to comply with the most recent RBI guidelines on digital lending.

To conclude

With the advancement of technology, features such as escrow accounts are becoming increasingly relevant. Escrow accounts are used in a variety of settings, from real estate to cryptocurrency trading.

As the demand forescrow services grows, so do the number of service providers. In such a case, it is critical to conduct extensive research before using the services, as escrow account fraud is on the rise.

Digital escrow in India

Digital escrow services are offered by many companies in India. Among the most trusted is Vouch

Vouch’s Digital Escrow service is a transparent way for buyers and sellers to build trust and secure a clean transfer of product and payment. Sellers can feel assured that they will be fairly compensated promptly, and buyers will feel confident that their orders will be delivered as expected and on schedule. Vouch Digital Escrow keeps you updated and informed at every step of the transaction process till the end. Vouch’s professionals are always available to assist you with all queries that you may have during the entire transaction process. 

There is no scope for deceit or fraud since the payments, shipping, delivery, and execution are carried out under the honest and watchful eyes of the Vouch’s professionals. With Vouch, any business transaction becomes transparent, uncomplicated, and hassle-free.

Check back here to learn more about Escrow and how to protect yourself from fraud.


Safety is not just about protecting your credit, debit card number, and UPI accounts. It's about having control of your money till you've received the product or service you bought online!

As you're now aware of the importance of online safety, let's get your transactions secure on Vouch. It's just a click away.