An escrow account acts as a neutral intermediary holding assets (usually money) until contractual obligations between buyer and seller are fulfilled, thereby reducing counterparty risk for both parties. It ensures the seller gets paid if they deliver, and the buyer gets the delivery if they pay.
Some suggest that India needs to move to an escrow-based payment mechanism to ensure a fearless business environment in the country. Which of the following correctly describes an escrow account ?
Asked in PPSC CS Prelims 2021 · Topic: Money & Banking (Payment Systems in India: Digital Payments, UPI, and Central Bank Digital Currency (CBDC))
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Answer: C. A third-party bank account for safeguarding the seller from the risk of the buyer defaulting on the payment to the seller after having received the goods and/or services.
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