Know more about the Nodal Account, why is it to be opened and maintained by the intermediaries
Under Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), the Reserve Bank of India issued certain guidelines in the Notification released on November 24, 2009. Various payment gateway, aggregators, and other digital payment platforms are emerging strong. The online payments and acceptance are adopted by different businesses and other institutions.
Also, the customers are preferring to pay online through various electronic and digital payment modes. In order to protect the customers and their payments, and also make sure that the payouts to the vendors /sellers are done without any delays, the RBI issued guidelines related to the opening and maintaining the bank accounts for the intermediaries to make the safe and timely transactions possible.
Terms to Understand
Before we understand the concept of the Nodal Account let us know the meaning of the Intermediaries and Merchant.
Intermediaries
When any organization collects the payments from the customers on behalf of another institution or merchants, for the services or products purchased by them and finally provides the final settlements to the sellers/service providers (merchants) then these organizations are known as intermediaries. The customers would be making the payment using the online payment mode. Examples of the intermediaries are the payment aggregators and payment gateway service providers; e-commerce and m-commerce that provide the platform to the sellers and facilitate the online payments.
The fees that the intermediaries charge for these services that they provide are known as Merchant Discount Rate (MDR) or Commission.
Merchant
The entities who would be accepting the payments through online payment modes for the goods or services that they provide are called the merchant. These entities would be accepting online payments through these intermediaries.
For the purpose of these directions from RBI, merchants shall include all Electronic commerce/Mobile commerce service providers and other persons (including but not limited to utility service providers) who accept payments for goods and services provided by them, through Electronic/Online Payment modes.
Nodal Account
Nodal Account is an internal account of the bank. The payments that are made by customers are credited to this account and then in the specified time period, the funds are settled to the merchant’s bank account.
Thus, the payments are first collected in this account on behalf of the intermediaries. This account would be controlled and maintained by the bank only. The intermediary cannot use the funds from this account for the personal interests and has no control over the transactions or funds.
The eCommerce/m-commerce or marketplaces set up a Nodal Account for the setting up of the vendors in an easy manner with their respective commissions. Also, it facilitates easy settlements, refunds, cashback and offers through it. It can help in the automation of the payouts and easy reconciliation of the transactions. The businesses indulged in Insurance can provide the claim amount disbursal without any hassle and can process the settlements easily to the vendors and merchants. For the Lenders and financing firms, the loan disbursement becomes easy. For lending aggregators, the systematic lendings, recollections, refunds, and disbursals are possible.
Setting up and Maintenance of Nodal Account
The intermediaries are required to fulfill pre-specified requirements and be eligible for starting this account such as transaction flow, business image, etc. It needs to come into agreement with the bank regarding the same. Generally, a current account needs to be opened with the same bank and the KYC needs to be submitted for that. As these Accounts are the internal account of the bank it would not require KYC.
There are a lot of processes in the operations of a nodal account, such as, with each customer payee a beneficiary is to be added and various approvals and authorizations are to be processed for the same. Also, not all of these functions are automated, a lot of processes need to be done manually.
It can receive the credits of – the payments made by the customer through that intermediary (as discussed earlier), funds to be converted from the normal account, and refunds issued by the merchant would be processed through it. The debits can be the payment settlements to the merchant, transfer to another nodal account (as per prespecified agreements), the customer refunds, and the intermediaries commission.
Thus, the intermediaries like PayKun cannot withdraw or take any other funds except for the entitled and predetermined commission.
Settlements i.e. the transfer of funds from the nodal account to the merchant’s account can take up to t+3 working days (when the time includes nodal account transfer) and t+2 working days (without the nodal account transfer). T is the transaction date.
The official notification from the RBI can be referred through this link: https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=5379
PayKun is the payment gateway solution processing the online payments through various payment modes and processing the smooth transaction providing the timely settlements. It strictly adheres to the guidelines and directions provided by the RBI and processes safe and secure transactions. Also, the robust APIs and SDKs make the integration process easy and provide an automated payment infrastructure.
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