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Merchants see captured payments on the gateway dashboard but no matching money in their bank, and do not know where the funds are held in between.
Customer payments pool in the aggregator's escrow account; each settlement debits that account for the merchant's gross captured sales less fees and GST, and credits the merchant's bank.
Track captured but unsettled payments in a gateway receivable ledger and match each settlement report to the bank credit it produced.
The gateway receivable equals money held in escrow for the merchant, and every settlement clears it to the bank with fees and GST booked.
After a customer pays you through a payment aggregator, the money first sits in a pooled bank account run by the aggregator. RBI’s current rules call it an escrow account; many people still say nodal account, the older term. The money is held for you, but it is not in your own bank account until the next settlement.
Why can’t the gateway credit my account the moment the customer pays?
Three reasons:
- Many merchants, many payments. An aggregator collects for thousands of merchants. Sending a separate bank transfer for every ₹300 payment would be slow and costly, so it batches them.
- Fees and refunds. The aggregator works out fees, GST on fees and any refunds before paying you the net amount.
- Risk checks. Holding funds briefly lets the aggregator deal with failed payments, disputes and fraud checks before money leaves the pool.
So the customer’s money moves twice: from the customer to the escrow account (in seconds), then from the escrow account to you (on your settlement cycle).
Nodal vs escrow vs your own current account
| Nodal account | Escrow account | Your current account | |
|---|---|---|---|
| Term from | RBI’s 2009 directions for intermediaries | RBI’s 2020 guidelines for payment aggregators | Your bank |
| Who opens it | The intermediary | The payment aggregator, at a scheduled commercial bank | You |
| Who operates it | The intermediary, within RBI rules | The aggregator, within RBI rules on permitted debits | You |
| What it holds | Pooled customer payments for many merchants | Pooled customer payments for many merchants | Your own money only |
| What you can see | Only your share, via dashboard and reports | Only your share, via dashboard and reports | Everything, in your statement |
For a merchant today, “nodal” and “escrow” point to the same thing in practice.
Worked example: ₹10,00,000 collected in a day
An online furniture store captures ₹10,00,000 of payments on Wednesday. Its agreement charges an illustrative 2 percent fee, settled T+1.
- Throughout Wednesday, customers’ payments land in the aggregator’s escrow account. The store’s share builds up to ₹10,00,000.
- On Thursday the aggregator calculates the deductions:
- Fee: 2 percent of ₹10,00,000 = ₹20,000
- GST at 18 percent on ₹20,000 = ₹3,600
- Total: ₹23,600
- The escrow account pays out ₹10,00,000 − ₹23,600 = ₹9,76,400 to the store’s bank.
- The fee and GST portion goes to the aggregator as its income and tax.
The store’s books on Thursday: Bank Dr ₹9,76,400; Gateway fees Dr ₹20,000; GST input Dr ₹3,600; Gateway receivable Cr ₹10,00,000.
On Wednesday night, before settlement, the store’s gateway receivable shows ₹10,00,000. That is the money sitting in escrow for it.
What does RBI’s escrow requirement for aggregators mean for money in transit?
In plain terms, under the RBI Guidelines on Regulation of Payment Aggregators and Payment Gateways dated 17 March 2020, issued under the Payment and Settlement Systems Act, 2007:
- The money collected from customers must be kept in the escrow account, not mixed with the aggregator’s own funds.
- The account can be used only for permitted payments, such as settling to merchants, refunds and the aggregator’s agreed fees.
- RBI’s guidelines also set outer limits on how long an aggregator may take to settle to merchants; your agreement then sets your actual cycle.
What it does not do: make the money yours to spend before settlement. Until the credit reaches your account, treat it as a receivable.
What should I check each month?
- The gateway receivable at month-end equals captured payments not yet settled.
- Every settlement report ties to exactly one bank credit.
- Fees and GST in the reports match the gateway’s monthly tax invoice.
What to read next
- Next in this series: how do you find a payment gateway settlement in your bank statement?
- How escrow movements are checked: nodal and escrow account reconciliation
- A gateway walkthrough: PayU settlement reconciliation
- When matching becomes daily work: payment gateway reconciliation
Payment-gateway settlement reconciliation is on the TransactIG roadmap.