RBI Allows Second Escrow Account for PPIs and PAs

What changed

Previously, non-bank PPI issuers and payment aggregators could only maintain one escrow account with a single scheduled commercial bank. Now, they may open one additional escrow account with a different bank, and inter-escrow transfers are allowed (though discouraged) with auditor certification. The requirement for prior RBI approval to shift accounts has been relaxed to prior intimation.

What it means for you

Banks can now compete for and service multiple escrow accounts from the same PPI issuer or PA, potentially increasing fee income and deposit balances. However, banks must ensure escrow agreements restrict fund usage to permitted purposes only, and inter-escrow transfers require clear audit trails. This change reduces concentration risk for payment entities, but banks need to update their internal controls and agreements accordingly.

What you must do

• Update escrow account agreements to include clauses allowing only permitted debits/credits and inter-escrow transfers with auditor certification.
• Train relationship managers to handle requests for additional escrow accounts from existing PPI/PA clients.
• Ensure compliance monitoring for inter-escrow transfers and report any unusual patterns to RBI as per guidelines.
• Review internal systems to track multiple escrow accounts per entity and flag any non-compliance with fund usage restrictions.

Who it affects

Scheduled commercial banks offering escrow services, Non-bank PPI issuers, Payment aggregators, Payment system providers and participants