Difference Between a Nodal Account and a Current Account ?


For any business to flourish, sales are the most important key. Now in the current era, sales have taken a different direction with online payment methods. There are various modes of online payments that can be confusing for any individual. If you are eager to know two of the commonly used terms, Nodal account, and Current account, in the trading world, this article will guide you through.

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    Difference between Nodal Account and Current Account

    Nodal Account Current Account
    A nodal Account is a type of current account that is used to hold the funds on behalf of customers & vendors (payouts) to safeguard the interests of the two parties. People who regularly conduct a vastly higher volume of transactions with banks keep current accounts. The majority of users of this type of account are companies. 
    A nodal account is preferred in terms of safety. It offers a high level of flexibility.
    A customer cannot withdraw money from a nodal account.  A customer can withdraw money from a current account at any time.

    What is a Nodal Account?

    In order to protect the interests of customers and vendors, nodal accounts are a form of current account that is used to hold money on their behalf (payouts). A nodal account guarantees that the money will never in any way become the intermediary’s property. The RBI mandated Nodal Accounts for intermediaries like aggregators, e-commerce platforms, and payment gateways. 

    When Are Nodal Accounts Used?

    E-commerce platforms frequently use nodal accounts to boost the level of trust between participants in transactions. With regard to nodal accounts, an individual account is set up to transmit money just for that reason. This makes sure that no one party is in possession of the escrow money at any given time during the transaction.

    Nodal accounts do offer a higher level of security than a current account. However, these accounts have the following restrictions

    • Cash cannot be taken out of a nodal account.
    • Money is used as the transactional medium.
    • The second point prevents one from processing transactions involving shares, debentures, and other investment instruments.  

    It is a legal requirement in India for businesses like online marketplaces to create nodal accounts for the buyers and sellers that use their platforms. The money is therefore held in a nodal account for a specific amount of time. If someone wants to purchase a book on Amazon using a debit card and there are issues with the purchase during this time, one can submit questions to Amazon. If the issue is confirmed to be real, Amazon refunds the funds to the customer (), and the seller collects the defective item. The buyer would have to continue using the product, though, if Amazon is unable to verify whether the question or concern is legitimate. 

    In other words, a nodal account’s function is to hold money on behalf of clients and suppliers. Customers’ and vendors’ interests are protected, making sure that the payments are collected, processed, and delivered to the respective vendors or businesses without any delays.

    How to Open a Nodal Account?

    Did you find the idea of nodal accounts fascinating? Would you like to open one for yourself? The procedure is straightforward. If a bank that is under Reserve Bank of India regulation offers a nodal account, you can open one there (obviously).

    Each bank has its own requirements for determining whether or not you qualify for the same. In general, the bank takes into account the cash invested and the standing of the company.

    In any case, you must provide the KYC documentation and adhere to all RBI rules as specified in the relevant laws. If you don’t, you can be subject to stiff fines. Therefore, hiring a legal consultant is in your best interest instead of paying hefty fines. 

    Here are a few samples of real-world scenarios of how Nodal accounts can benefit a business

    • Marketplaces & e-commerce
    • It is simple to set up vendors and sellers, as well as commissions and settlements.
    • Instant reimbursements using different bank settlement methods
    • Automates payment distributions and easily accommodates multiple payments
    • Offer customers rewards and deals through direct settlements 

    What is a Current account?

    People who regularly conduct a massively higher volume of transactions with banks keep current accounts. The majority of users of this type of account are businesses. 

    There is no requirement to introduce a current account. If you don’t have current accounts, are you even in business? It is thus because current accounts serve as a company’s right hand.

    In terms of the volume of transactions, cash deposits, and withdrawals, they offer more features than a savings account. But everything has a price. They don’t provide interest on the bank balance because they offer so many facilities. Additionally, current accounts typically have hefty minimum balance requirements.   

    Why do People Choose Current Accounts?

    Remember that a current account is entirely distinct from a nodal account before learning more about them. While they uphold the transaction’s trustworthiness, they serve a completely different objective. 

    Current accounts are typically used by businesses because of how flexible they are. Due to the absence of interest on deposits, this account differs from a savings account. The account holder obtains a high level of liquidity in its place. As a result, one can take money at any moment from a current account. NEFT (National Electronic Funds Transfer) or RTGS (Real-Time Gross Settlement) transactions can be made, depending on the volume of your transactions. With these techniques, money is sent straight to and from the current account.

    Although it is simple, using current accounts for transactions is not always secure. It is always possible to run into issues like differences in the agreed-upon value of a transaction between two or more parties. Ultimately, one may have to resort to legal action to resolve these issues. 

    However, the fact that current accounts are not based on agreements may be the most significant factor in why they are not sufficiently secure. Without first reaching an agreement with them, you can conduct transactions with several parties without difficulty. Transactions into and out of a current account are not subject to any particular clauses or terms and restrictions. In some respects, this can also be freeing for some businesses. Naturally, it is simpler to hold one wallet with Rs. 10,000 in it, from which you may execute ten different transactions, than it is to hold ten wallets, each with Rs.1,000, to execute transactions with ten different parties. On the other hand, withdrawals that are not covered by agreements may lead to fraud. 

    What does your business need?

    If you are a business owner who wants flexibility over your transactions, you should consider choosing a current account, while if you are looking for safer modes of transactions, you should prioritize a Nodal account. 

    Although these two might have different features, the two can be used for your business. 

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    NTT DATA Payment Services is the best solution if you are looking for a payment gateway for your business. It ensures a seamless transaction between the required parties without any delay. It serves more than 6 million merchants across the globe, processing an annual transaction value of INR 1.4 lac crores 

    By utilizing the best online payment service provider in India, which accepts payments by UPI, Links, Bharat QR, EMI, IMPS, Credit and Debit Cards, and wallets,  among other methods, and is integrated with more than 50 banks and 100 different payment options, you may accelerate the growth of your business. Its extensive feature set is designed to assist both new and experienced businesses in boosting revenue, lowering risks, and safeguarding customer information. 


    By now, you would have an elaborate idea about a current account and a nodal account. You can decide to choose which one works best for your business. To know more about other services that can be availed for your business, please take a look here.


    1. What is a current account in a bank?

    You can deposit and withdraw money from a current account with a bank. To help you pick the account that best meets your needs, the majority of banks provide a variety of current accounts with various characteristics. 

    2. Difference between a Savings Account and a Current Account?

    A savings account is appropriate for those who are salaried or receive a monthly income, but a current account is best for business owners and traders who frequently need to access their funds.  

    3. Advantages of a nodal account?

    A nodal account is used to account for the “trust” aspect. Customers’ and vendors’ interests are protected, ensuring that payments are collected, processed, and paid out to the appropriate vendors without unnecessary delay.

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