NACH Mandate

What is NACH?

NACH’s full form is the National Automated Clearing House, and this solution was established by the National Payments Corporation of India (NPCI). NACH enables easy transfer of funds between banks electronically. 

It is a central system that helps strengthen the local and regional ECS (Electronic Clearing Service) systems that were previously used for bulk transactions. With NACH, banks across the country can carry out a large number of electronic fund transfers. 

The word ‘automated’ in the NACH full form also reveals its primary function, as this system is best used for recurring or repetitive payments. It also supports Aadhaar-linked transactions. Apart from being a scalable system, NACH is also safe with multiple levels of data validation. 

As a bank account holder, you can authorise payments to be deducted directly from your account using the NACH mandate. This may be for loan EMIs, credit card payments, utility bills, SIPs or insurance premiums. 

NACH supports the financial inclusion policies of the government by being available on all days of the year as of August 2021. 

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

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  a single settlement. Organisations can also track NACH debit transactions via online channels.

• NACH Credit

NACH credit allows  businesses to make sizable payments directly into the bank accounts of a large pool of beneficiaries. A  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.

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

• It uses technology to offer an advanced platform that is capable 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

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 the 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 by the destination bank. For an e-mandate, you can set it up directly by completing a one-time transaction for authorisation on the merchant website.

To avail NACH services, you can visit the bank’s website and opt to fill out the NACH mandate form. Once you have filled in the details, you would 

get redirected to the destination bank’s website. Here, you must authenticate your request using your net banking credentials. The bank would then verify the account number and decide whether to accept or reject it. If accepted, the mandate gets confirmed and future transactions can be scheduled. You would receive a number known as the 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 and amend or cancel them.

To avail 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.

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

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, the destination bank is expected to pay the penalty if the mandate isn’t processed within ten working days.

NACH mandate cancellation refers to the removal of the automatic debit instruction linked to 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. You can use the NACH mandate cancellation form to nullify a mandate.