An Escrow Account is a temporary account managed by a third party, such as a bank, to securely hold funds or assets on behalf of two parties until all the terms
An Escrow Account in an IPO is a temporary bank account opened by the issuer company with a scheduled bank to hold the funds collected from investors during the IPO process. It acts as a secure intermediary account where application money remains until the allotment of shares is completed.
These accounts are jointly managed by the issuer, the registrar, and the bank (acting as the escrow collection bank). The purpose of the escrow account is to ensure that investor funds are safely held and are only transferred to the company once the shares are allotted. If shares are not allotted, the amount is refunded to the investors directly from this account.
This system provides transparency, minimises the risk of fund misuse, and ensures that the IPO process is carried out smoothly under the supervision of SEBI and the banking system.
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