BTL 949 - Escrow Account

 

The Banking Tutor’s Lesson

BTL 949                                                                                           15-10-2026

Escrow Account

An escrow account in simple terms is a third party account. It is a separate bank account to hold money which belongs to others and where the money parked will be released only under fulfilment of certain conditions of a contract.

The term escrow is derived from the French term “escroue” meaning a scroll, a scrap of paper or roll of parchment, an indicator of the deed that was held by a third party till a transaction is completed. It traces back to the Old French word escroe (or escrew), which translates to a scroll or roll of parchment.

An escrow account is an arrangement for safeguarding the seller against its buyer from the payment risk for the goods or services sold by the former to the latter. This is done by removing the control over cash flows from the hands of the buyer to an independent agent. The independent agent, i.e, the holder of the escrow account would ensure that the appropriation of cash flows is as per the agreed terms and conditions between the transacting parties.

In India escrow account is widely used in public private partnership projects in infrastructure. RBI has also permitted Banks (Authorised Dealer Category I) to open escrow accounts on behalf of Non Resident corporates for acquisition / transfer of shares/ convertible shares of an Indian company.

Sekhar Pariti

+91 9440641014

 

Daily Concept No 2588 - Big Three Automakers

 

Daily Concept No 2588 - Big Three Automakers

 

The Big Three in the automotive industry is a reference to the three largest car manufacturers in the United States: General Motors Company (GM), Stellantis (STLA), formerly known as Fiat Chrysler, and Ford Motor Company (F). The Big Three are sometimes referred to as the "Detroit Three." All three companies have production facilities in the Detroit area, so their performance has a significant effect on the city's economy.

 

 

 

 

 

 

 

 

 

The Banking Tutor’s Lesson, BTL 949 - Escrow Account                                                                          

An escrow account in simple terms is a third party account. It is a separate bank account to hold money which belongs to others and where the money parked will be released only under fulfilment of certain conditions of a contract.

The term escrow is derived from the French term “escroue” meaning a scroll, a scrap of paper or roll of parchment, an indicator of the deed that was held by a third party till a transaction is completed. It traces back to the Old French word escroe (or escrew), which translates to a scroll or roll of parchment.

An escrow account is an arrangement for safeguarding the seller against its buyer from the payment risk for the goods or services sold by the former to the latter. This is done by removing the control over cash flows from the hands of the buyer to an independent agent. The independent agent, i.e, the holder of the escrow account would ensure that the appropriation of cash flows is as per the agreed terms and conditions between the transacting parties.

In India escrow account is widely used in public private partnership projects in infrastructure. RBI has also permitted Banks (Authorised Dealer Category I) to open escrow accounts on behalf of Non Resident corporates for acquisition / transfer of shares/ convertible shares of an Indian company.

 

 

Daily Concept No 2587 - Appropriation

 

Daily Concept No 2587 - Appropriation

 

Appropriation is when money is set aside for a specific purpose. A company or a government appropriates funds in order to delegate cash for the necessities of its operations. A company might appropriate money for short-term or long-term needs that include employee salaries, research and development, and dividends.

Daily Concept No 2586 - Wage Drift

 

Daily Concept No 2586 -  Wage Drift

Wage drift is defined as the difference or change in the wage actually paid to a worker as compared to a locally negotiated wage. The increase could be due to several reasons such as overtime, bonus payment paid out by the company etc.

Deflation - Dis-inflation - Reflation

Deflation - Dis-inflation - Reflation 

Deflation is a general decline in prices for goods and services,  associated with a reduction  in the supply of money and credit in the economy, but prices can also fall due to increased productivity and technological improvements. 

During deflation, the purchasing power of currency rises over time.  

Deflation benefits consumers because they can purchase more goods and services with the same nominal income over time. In particular, deflation can harm borrowers, who can be bound to pay their debts in money that is worth more than the money they borrowed, as well as any financial market participants who invest or speculate on the prospect of rising prices.   

Disinflation is a temporary slowdown in the rate of price inflation, meaning the general price level of goods and services is still rising, but at a slower pace than before.

Inflation and deflation  refer to the direction of prices, disinflation refers to the rate of change in the rate of inflation.   

Examples

1. Inflation

• A loaf of bread costs Rs 2.00 this year. Next year, due to inflation, the same loaf costs Rs 2.10. You need more money to buy the exact same item. 

2. Disinflation

•Last year, a loaf of bread jumped from Rs 2.00 to Rs 2.20 (a 10% inflation rate). This year, it goes from Rs 2.20 to Rs 2.27 (a 3.3% inflation rate). The bread still costs more, but the speed of the price increase has slowed down. 

3. Deflation

• A loaf of bread that cost Rs 2.00 last year now costs Rs 1.80 this year. 

Reflation

Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes, seeking to bring the economy (specifically price level) back up to the long-term trend. It is a deliberate government or central bank policy (like cutting interest rates, lowering taxes, or printing money) used to lift prices and stimulate growth after a slowdown or deflation. 

After a deep economic slump where prices kept falling, the government cuts interest rates and builds new roads. This puts money in people's pockets, gets them spending again, and gently pushes prices back up to a healthy level. 

Reflation is the correct and standard economic term, while reinflation is generally used in physical contexts (such as filling a balloon or tire with air again)

Daily Concept No 2585 - Star (*) Series Currency Notes

Daily Concept No 2585 - Star (*) Series Currency Notes

The Star symbol  is inserted in the number panel of a banknote that is used as a replacement for defectively printed banknotes in a packet of 100 pieces of serially numbered currency notes, the central bank said. Fresh banknotes issued by the Reserve Bank of India till August 2006 were serially numbered. Each of these notes have a distinctive serial number along with a prefix consisting of numerals and letters.

EDPMS

 

EDPMS

Export Data Processing and Monitoring System (EDPMS) EDPMS  is a centralized digital platform launched by the RBI to track, regulate, and monitor export transactions from shipment to final payment realization.

 

It serves as India's compliance backbone under the FEMA, ensuring all foreign exchange earned from exports is repatriated into the country within the statutory timeline (typically 9 months).

 

How the EDPMS Lifecycle Works

 

The system automates what used to be a heavily fragmented, paper-based reporting model by connecting three core entities via a real-time data flow: 

 

[Customs / ICEGATE] ───(Shipping Bill Data)───> [RBI EDPMS Server] <───(Inward Remittance/Closure)─── [AD Category-I Bank]

 

1. Shipment Generation: When an exporter ships goods, Customs automatically sends the Shipping Bill details directly to the EDPMS portal. For software exports, this is done via the SOFTEX form.

2. Open Entry Allocation: The data is mapped to the exporter's Import Export Code (IEC) and visible to their designated Authorised Dealer (AD) Category-I bank as an "Open Entry". 

 

3. Payment Realisation: When the foreign buyer sends payment, the AD bank receives the funds and generates an Inward Remittance Message (IRM). 

 

4. Reconciliation & Closure: The bank matches the shipping bill with the payment received. Once reconciled, the bank generates an electronic Bank Realisation Certificate (eBRC) and changes the status to Closed. 

 

Key Features & Important Rules Real-time Tracking:

 

Exporters can securely track the real-time status of their shipping bills and matching statuses via the ICEGATE Portal Public Enquiry Tool. 

 

Mandatory for Incentives: An eBRC generated out of EDPMS is mandatory for exporters to claim GST refunds or duty incentives from the DGFT. 

 

The Caution List Risk: If an export entry remains "Open" without a valid payment or an official extension for more than 2 years, the system automatically flags the exporter onto the RBI Caution List. Caution-listed companies face customs delays and a freeze on open bank facilities. 

 

Recent Regulatory Easing (October 2025 Directive) To reduce the compliance strain on MSMEs and e-commerce exporters, the RBI introduced a permanent relaxation framework.

The Latest Changes to the EDPMS

 

The latest changes to the Export Data Processing and Monitoring System (EDPMS) take effect under the Reserve Bank of India’s (RBI) new Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, which went live on October 1, 2026.

 

Key Changes & Framework Updates (Effective October 1, 2026)

 

Unified Reporting for Services and Software:

 

The separate SOFTEX form for software exporters is retired and folded into a single consolidated Export Declaration Form (EDF).

 

Service exporters (including IT/ITES, consulting, and B2B agencies) are now integrated directly into the EDPMS workflow via AD (Authorized Dealer) banks rather than customs-generated shipping bills.

 

Service exporters can club monthly invoices into a single EDF and file it through their AD bank by the 30th of the following month.

 

Realisation Timelines:

Standard export realization and reporting timelines are updated to 9 months for general goods and services, and extended to 12 months for exports invoiced and settled specifically in Indian Rupees (INR) under the designated provisions.

 

Small-Value Declaration Route (Retained & Expanded):

 

For export entries and shipping bills up to ₹10 lakh, EDPMS entries can be closed via a simplified exporter self-declaration confirming proceeds realization.

 

These declarations can be submitted on a consolidated quarterly basis.

 

AD Bank Autonomy & Document Uploads:

 

o    AD banks are required to upload supporting trade documents into EDPMS/IDPMS within 5 working days of receipt.

 

o    AD banks have been granted broader autonomy to handle reconciliations, extensions, and write-offs without routing every minor exception directly through the RBI.

 

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