What is a Nodal Account? RBI Guidelines and More| North Loop Official Blog
North Loop Logo
North Loop
27 Apr 2021

What is a Nodal Account? RBI Guidelines and More

thumbnail for What is a Nodal Account? RBI Guidelines and More
Credit: North Loop

The rise of the digital age has led to the growth of many new and complex business models. These usually involve a marketplace, payment gateway providers, aggregators etc.

All of these intermediaries help connect the consumers to the vendors and hold money on their behalf. After they deduct their commission, they disburse the rest to the entities such as the vendors and logistic partners.

As you can guess, this interlink of unknown entities became quite complex. It required a legal process to safeguard the interests of the consumers and reduce any delay in the payout to all the third parties.

To battle this very issue, the RBI introduced guidelines for the formation of nodal accounts.

What is a nodal account?

A nodal account is a unique bank account opened by businesses or intermediaries holding money on behalf of vendors and customers. The purpose is to ensure that money does not legally belong to the intermediary at any point in time.

RBI nodal account guidelines for a marketplace -

RBI has issued guidelines around the operation of nodal bank accounts. It has done that to regulate payments in the marketplace ecosystem.

The guidelines apply to marketplace platforms or aggregators that collect money from customers on behalf of the vendors. It also safeguards the interests of the consumers.

So whenever a customer makes payments through the online or offline mode, the rules laid down by the RBI automatically apply to the intermediaries. It also ensures that the vendors providing the goods or services get duly paid.

However, businesses that facilitate the delivery of services immediately do not need to comply with these rules. They can merely opt for real-time conciliation and get immediate payment confirmations.

Since nodal accounts are internal accounts of the bank that facilitate the collection of payments by intermediaries from customers, let us take all look at the permitted credits or debits in nodal bank accounts -


Payments from customers buying goods or services

Transfers into nodal accounts based on predetermined terms and conditions

Refunds for failed or disputed transactions


Payments by a marketplace to multiple vendors

Transfers from nodal accounts based on predetermined terms and conditions

Transfers representing refunds for failed, disputed transactions

Commissions to the intermediaries at predetermined rates

How to set up and operate a nodal account?

Once you satisfy a bank’s strict criteria about transaction volumes, compliance requirements and business reputation, you can set up a nodal account.

First, you have to sign a nodal bank account agreement that provides all the details of the terms and responsibilities of the operation. And even though theoretically, nodal accounts do not require the intermediary’s KYC, but in reality, KYC is necessary to set it up.

Overall, the operation of nodal accounts can be very challenging. All the steps like the addition of beneficiaries or approval of transactions are time-consuming and require bank intervention. And there is also limited scope to automate the repetitive functions via an API.

However, if you opt for a fintech company with an innovative suite of payment solutions, most of these problems can get solved effortlessly.

What North Loop’s market settlement lets you do?

It takes a considerable amount of effort, time and resources for a marketplace or business to implement a system that handles the flow of money and its disbursement seamlessly. And with the massive expansion of the internet-based economy and new business models, using traditional payment gateways is no more an option. Taking into account these factors, North Loop engineered a solution.

North Loop market settlements focus on building your business and takes care of all your collection, disbursal, compliance needs and nodal account.

We offer an elegant, simple, and powerful API that you can leverage for your business. Our market settlement works as follows -

Simplifying payments -

It ensures faster settlement to vendors within a T+2 settlement cycle

It allows you to connect your marketplace with our North Loop payment gateway to automate accepting and releasing payments in an integrated system

It works with other payment gateways and cash on delivery orders as well

It allows you to sell through your marketplace even as an international vendor, with a T+2 settlement into the home bank account

It integrates easily with our APIs and sets up within minutes

Helping finances -

Our marketplace settlements run on our managed nodal account. That means you do not need to worry about auditing and compliance

It allows faster tax computations as you can access marketplace earnings per transaction

You can also get a detailed report about your earnings

Save money with

No-fee banking, investments, remittances & insurance for the global Indian

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.