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What is the Full Form of NACH?

NACH stands for National Automated Clearing House. This platform is for clearing funds and it was set up by the NPCI (National Payments Corporation of India) to do away with the two-factor authentication requirement of electronic interbank transfers and process recurring high-volume transactions of both low and high value, automatically.

For example, if you apply for a health insurance plan today and sign up for the NACH facility with the bank, your premiums will get paid automatically from your account without you having to initiate or track them.

What is the Difference between ECS and NACH?

The ECS (Electronic Clearing Service) mandate was introduced by RBI to assist with periodic payments. It functions as a system that allows electronic credit and debit transactions from your account at regular intervals. While this may seem similar to the offerings of NACH, there are some critical differences between the two.

NACH

ECS

NACH is an automated and web-based process.

ECS involves a manual process and, hence, takes time to settle a transaction

You get a Unique Mandate Reference Number (UMRN) that can be used for future references

ECS does not provide a reference number

NACH has a very convenient application process and involves minimal paperwork

ECS involves a significant amount of paperwork and has a high chance of rejection

NACH payments are settled in a day

ECS payments can take up to 4 days to settle

NACH has a dedicated dispute management system

ECS has no dedicated dispute management

NACH registration gets confirmed by the end of the day

ECS registration process can take anywhere between 25 to 30 days

What are the Types of NACH?

There are two types of NACH mandates that facilitate the electronic transfer of funds:

NACH Debit

NACH debit is designed to make the process of collecting recurring payments like EMIs, bills, etc., easier for organisations. It helps automatically deduct funds from a large pool of customers in a safe and secure way by means of a single settlement. Organisations can also track NACH debit transactions via online channels.

NACH Credit

NACH credit allows authorized businesses to make sizable payments directly into the bank accounts of a large pool of beneficiaries. A centralized unit controls the high-value transactions done through a single system. Corporates and other large organisations can leverage the NACH credit facility to distribute salaries, interest, etc.

Objectives of NACH

  • NACH functions as a centralised system for multiple ECS systems.

  • It uses technology to offer an advanced platform that is capable to handle huge volumes of repetitive payments.

  • The rules and practices for electronic transactions are easy to follow and common for all participants.

  • It supports Aadhaar-based and mobile-based ACH transactions.

What is eNACH and eMandate?

e-NACH and e-Mandate are simply services that aid both customers and merchants in handling recurring payments. While both deliver the same results, they are slightly different in their structure.

On one hand, e-NACH is facilitated by NPCI, which covers more than 40+ banks. On the other hand, e-Mandates are managed by individual banks and are available for only a handful of them. If you were to opt for e-NACH, you would need to fill up a form online on your bank website and get it approved from the destination bank. For an e-mandate, you can set it up directly by completing a one-time netbanking transaction for authorisation on the merchant website.

What is the Process of Availing NACH?

To avail NACH services, you can visit the bank’s website and opt to fill the NACH mandate form. Once you have filled in the details, you would get redirected to the destination bank’s website. Here, you would have to authenticate your request using your net banking credentials. The bank would then verify the account number and decide whether to accept or reject. If accepted, the mandate gets confirmed and future transactions can be scheduled. You would receive a number known as the UMRN.

What is UMRN?

UMRN stands for ‘Unique Mandate Reference Number’ and is associated with your NACH mandate creation. It is generated automatically by the NACH system when creating your mandate. You can use this to track your mandate details later as well as to amend or cancel them.

Features and Benefits of NACH Mandate

For consumers

For organizations

For banks

Makes it easier to handle recurring payments as the process is automated

It is timesaving as transactions can be settled in a single day

As the funds are auto-debited, there is no need to remember the dates for each recurring payment

Easy access and swift cancellation make it user-friendly

Using only the net banking credentials, you can authenticate your transfer request via NACH

The process is safe and secure

The online NACH mandate does away with the need to clear high volumes of cheque payments

It saves time as the approval time is minimal for sending money to a large pool of beneficiaries

Higher customer satisfaction owing to easy bill settlement

Better customer relations owing to faster approval of payments

Timesaving and less complex as there is no need for cheque clearing

The online transactions make the service more manageable

Chances of fraud and thefts are reduced significantly

The cost of invoicing can be done away with

No probability of late payments

What is a NACH Form?

For availing the automatic, scheduled payment service offered by NACH, you need to fill up a form known as the NACH mandate form. By filling in the form and placing a request, you give the bank the right to debit your account periodically for a fixed tenure. The recipient account also reviews the NACH form and accepts the mandate to allow the auto-debit of funds from your account.

Which Banks Provide NACH as a Service?

Currently, all major banks in the country offer NACH as a payment service. This includes Axis Bank, HDFC Bank, Citibank, State Bank of India, ICICI Bank, RBL Bank, etc.

What are NACH Charges?

Certain NACH mandate charges are applicable on NACH transactions. For e-mandates, the processing fee is payable both by the sponsor bank as well as the destination bank. Also, if the mandate isn’t processed within ten working days, the destination bank is expected to pay a penalty.

What is Meant by NACH Mandate Cancellation?

NACH mandate cancellation refers to the removal of the automatic debit instruction linked with your account. Such debit instructions could be related to utility bill payments, payment of insurance premiums, etc. Most banks offer the option to cancel the NACH mandate online itself. You can use the NACH mandate cancellation form to nullify a mandate.

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FAQs About NACH Mandate

✔️What is a NACH Mandate?

The National Automated Clearing House (NACH) service facilitates the electronic, interbank transfer of funds, which are recurring in nature, without any manual intervention.

✔️How do I check my NACH Mandate status?

To check your NACH mandate status, you would need to follow the steps mentioned below:

  • Sign in to your bank’s netbanking portal or mobile banking app.

  • On the home page, click on ‘Service Request’.

  • Choose the ‘Account Related’ option to view your NACH status.

✔️What is a NACH payment?

NACH payment refers to the automatic debit of funds from one bank account and credit to another bank account without manual intervention. You can avail the service by filling in the NACH mandate form.

✔️Is a NACH mandate safe?

Yes, the NACH mandate is governed and facilitated by the National Payments Corporation of India and is completely safe.

✔️What is NACH meaning in banking?

NACH or National Automated Clearing House refers to the interbank transfer of funds electronically. Transactions made using NACH are recurring in nature.