Introduction 

In India's fast-changing business world, trust is essential for every valuable transaction. Whether it’s a real estate deal, a startup seeking investor funds, a co-lending agreement, or a marketplace handling third-party money, protecting payments is crucial. This is where opening an escrow account in India proves to be invaluable. 

An escrow account is more than just a secure bank account. It’s a legal arrangement where a neutral third party, typically a bank or a regulated trustee, holds funds for the parties involved until specific agreed conditions are met. This protects both buyers and sellers from fraud, defaults, or misuse of funds. 

In this guide, we’ll explain how to open an escrow account in India, the necessary documentation, the types of businesses that should use them, compliance aspects, and how modern escrow platforms like Castler streamline this process.

What Is an Escrow Account? 

Before opening an escrow account in India, it’s important to know what it is and its purpose. An escrow account serves as a neutral financial safe. Funds are deposited here by the buyer and only released to the seller once contractual obligations are fulfilled. 

For instance, in a property deal, the buyer’s money is held in escrow and only given to the developer after the necessary regulatory approvals or project milestones are met. This prevents misuse of advances, ensures accountability, and builds trust in transactions. 

Escrow is commonly used in: 

• Real estate (RERA compliance) 

• Mergers and acquisitions (holding back deal payments) 

• Cross-border trade (conditional payments) 

• Co-lending and NBFC settlements 

• Marketplace payments for buyer-seller protection 

• Tokenized asset sales and digital transactions 

Who Can Open an Escrow Account in India? 

In India, any individual or legal entity can open an escrow account, but a bank or licensed trustee company must facilitate it. Typically, the parties involved are: 

• Buyer/Investor: who deposits the funds. 

• Seller/Beneficiary: who receives funds after meeting conditions. 

• Escrow Agent/Trustee: a neutral party holding and releasing funds based on agreed terms. 

Most Indian businesses prefer to work with regulated escrow service providers like Castler, a trusted digital escrow platform approved for multi-party fund flows.

How Does an Escrow Account Work in India? 

Let’s break it down in easy steps: 

• Agreement Stage: The buyer and seller agree on the deal terms and conditions. 

• Escrow Instruction: An escrow agreement is drafted to legally bind all parties regarding the fund release. 

• Account Setup: The escrow agent (bank or trustee) opens a dedicated escrow account for the transaction. 

• Fund Deposit: The buyer or investor puts money into the escrow account. 

• Monitoring: The escrow agent keeps track of progress or milestones. 

• Fund Release: Once conditions are met, the agent releases funds to the seller or beneficiary. 

This structure ensures that neither party bears the full risk, and all participants remain protected under a legally binding framework.

Documents Required to Open an Escrow Account in India 

Opening an escrow account in India is simple but requires proper documentation to comply with RBI and sector-specific regulations (like RERA for real estate). 

Typical documents include: 

• KYC documents of all parties (PAN, Aadhaar, Certificate of Incorporation for companies) 

• Detailed escrow agreement specifying milestones, payout conditions, roles, and responsibilities 

• Board resolution for companies authorizing the escrow setup 

• Regulatory approvals, if applicable (for real estate projects, co-lending structures, cross-border deals) 

• Bank account details for funding and payment disbursement 

Working with a trusted escrow provider like Castler ensures that these documents are managed securely and the process runs smoothly.

Key Steps to Open an Escrow Account in India 

Now that you know the basics, here are the steps to open an escrow account in India: 

1. Select the Right Escrow Service Provider 

Banks offer basic escrow accounts but may lack the speed or digital integrations that modern businesses need. Trustee-led platforms like Castler specialize in customized escrow arrangements for complex industries such as real estate, fintech, co-lending, and digital marketplaces. 

2. Draft a Clear Escrow Agreement 

• A solid escrow agreement must define: 

• Parties involved 

• Amounts and conditions for release 

• Duration of holding 

• Dispute resolution clauses 

• Fees and responsibilities of the escrow agent 

Working with an expert escrow partner ensures the agreement meets regulatory requirements. 

3. Complete KYC and Onboarding 

All parties must submit KYC and compliance documents. Digital escrow platforms like Castler provide eKYC onboarding, making it faster than traditional banking paperwork. 

4. Fund the Escrow Account 

After creating the account, the buyer or investor puts money into the escrow account. Funds remain locked until the conditions are verified. 

5. Monitor Milestones and Approvals 

The escrow agent tracks project milestones, compliance checks, or any approvals needed to release the funds. 

6. Funds Release 

Once the conditions are met, the escrow agent initiates payouts to the seller or service provider.

Benefits of Opening an Escrow Account in India 

Why should businesses open an escrow account? The benefits are clear: 

• Risk Mitigation: The buyer’s money is protected until requirements are met. 

• Trust and Transparency: All parties work under a binding agreement with neutral oversight. 

• Regulatory Compliance: Meets statutory requirements like RERA for real estate or SEBI guidelines for securities. 

• Dispute Resolution: Escrow agents help resolve disputes based on agreed terms. 

• Audit Trails: Every transaction is documented, traceable, and ready for audit.

When Should You Open an Escrow Account? 

Here are situations where an escrow account is not just useful but essential: 

• Real Estate: To comply with RERA, developers must keep 70% of buyer advances in escrow to prevent misuse. 

• M&A Deals: Acquirers hold part of the deal payments in escrow for adjustments post-closing. 

• Co-Lending: NBFCs and banks jointly lend; escrow ensures clear fund segregation and transparent settlements. 

• Marketplaces: E-commerce platforms or gig economy apps use escrow to protect buyer payments until sellers fulfill their obligations. 

• Cross-Border Payments: Escrow ensures payments only happen when documentation clears customs or contracts are met.

What to Look for in an Escrow Partner 

Not all escrow services are alike. When you plan to open an escrow account in India, make sure your provider offers: 

• Trustee-backed, regulated fund flows 

• Multi-party settlements and custom conditions 

• Digital onboarding and eKYC 

• API integrations for real-time fund tracking 

• Dispute resolution and audit support 

Platforms like Castler check all these boxes, offering India’s first digital escrow service with trustee oversight and multi-bank redundancy.

Compliance Considerations for Escrow Accounts in India 

India’s regulatory framework for escrow accounts varies by sector. For example: 

• Real Estate: Governed by RERA developers must keep advances in separate project-specific escrows. 

• Fintech/Co-Lending: Subject to RBI guidelines for NBFCs and digital lenders — funds must flow through trustee accounts. 

• M&A/Investments: SEBI requires escrow for share purchase agreements to protect buyer and seller interests. 

Castler ensures that every escrow account meets sector-specific guidelines, with automated reconciliations, trustee-backed approvals, and complete audit trails.

How Castler Makes Opening an Escrow Account Effortless 

Castler is India’s leading escrow and transaction banking platform, designed for regulated industries. When you open an escrow account with Castler, you get: 

• Trustee-backed infrastructure: Funds are secure and compliant. 

• Digital onboarding: Complete KYC and setup without paperwork. 

• Smart Monitoring: Automated milestone tracking and release processes. 

• Multi-party support: Ideal for complex structures like co-lending, marketplaces, and developer-buyer agreements. 

• Audit-Ready: Detailed logs, reports, and compliance documentation. 

From small startups to large enterprises, hundreds of businesses trust Castler to secure their valuable transactions.

Final Thoughts 

Opening an escrow account in India goes beyond just parking money. It’s about building trust, ensuring compliance, and growing your business safely. 

Whether you’re a developer, fintech, lender, investor, or marketplace operator, an escrow account provides your stakeholders with peace of mind and regulatory clarity. 

Ready to open an escrow account that suits your needs? Discover how Castler’s digital escrow solutions can change the way you handle secure payments. 

Explore Castler Escrow Solutions and contact our team today!