While Instead of ECS, NACH has become mandatory to all the customers, so we need to know.Its benefits and Working.NACH stands for National Automated Clearing House.NACH is a service offered by the National payment corporation of India (NPCI). NPCI is a body created by Reserve Bank Of India (RBI). NPCI is the body which facilitates all the e-payments done across the country.NPCI aims to give the power to do e-payments to all the citizens.While all of the banking is getting automated and instant fund clearance has become very necessary for business needs.NACH became a very useful service for instant fund transfer or Internet banking.
For what NACH can be used?
- Collection of Utility Bills-Any utility billing that has to be done on a regular basis. For example-Billing of Municipal water supply, Electricity Billing, Gas Billing, Cable TV Billing Or Mobile Phone Billing. Depending on the Customers discretion.
- SIP-Systematic Investment Plan is a fixed amount that a customer invests in regular intervals.For example- Mutual Funds Investments, Life Insurance Corporation Investments.
- Insurance Premiums-Regular interval investments on like Car Insurance, Health Insurance, and other related Insurances.
- Credit Card Bills– Monthly payments of Credit Cards.These payments can be fixed on a maximum limit.For example-If, my approximate monthly Credit Card bill is of 20,000, So I can fix this amount and monthly when the amount is debited like if billing of 18,000 is to be done, only 18,000 will be debited not more then that.And if the limited exceeds then it’ll be notified to the customer.
- Donations-Regular interval Donations which is to debited. Like yearly Donations to schools, NGO or any organizations can be fixed.
- Supply Chain Collection-We can understand this with the example of a Company which orders for an office stationery of 30,000 every month. This can also be fixed in NACH mandate to pay a sum of 30,000 to that Stationery supplier monthly.
Any recurring collection requirement of Corporates which is to be done on a regular basis.
How to Apply for NACH in your bank for Recurring collection Requirement-
- Corporate collects NACH mandate from the account holder.This mandate authorizes the bank to debit his account for a fixed time period.
- Verifies the mandate and sends it to the Corporate Bank.Then it is sent to the customer’s bank for further verification.
- After these steps, the bank is authorized to collect funds from customers bank account on a regular basis
NPCI validates each mandate before the NACH debit from customers bank account.
This whole process of Applying for NACH debit can also be done through Net banking. Validating the E-Mandate can be done through the customer’s bank website.This can only be done if the customer has Internet Banking Enabled.
Why NACH over ECS
- Have only 89 centers in our country.So Functioning is limited to certain countries.
- Clearance and transfer take 2 to 3 days for completion.
- In case of any Dispute, the Destination and Sponsor banks are responsible.
- There is no concept of a unique number of customers.
- A higher number of rejections are reported related to the mandate issue.
- Have over 82000 plus bank branches to operate.Functioning becomes more secure and flawless.
- Same day settlement including the refund process if required.
- This system has a well defined Dispute Management System to resolve any type of Dispute.
- Customers Have a unique Mandate registry number.
- The lower number of rejections compared to ECS.
- High Volume transactions are done easily.
- Faster and much secure when compared to ECS.
- Uses Core-Banking Solution for connecting payment system to all banks.
Other Features of NACH-
- The customer can stop the NACH service at any point of time by submitting a cancellation form.
- The default expiry date of a NACH mandate is 31/12/2099
- Amount, date and how frequently the amount will be debited though NACH, mentioned can be altered at any point in time.
- There is no limitation for NACH registration by a user.
NACH’s Adhaar Payment Bridge- This payment system is also been developed by NPCI for faster and secure transaction between the beneficiary through biometric and Adhaar number only.Through Adhaar number and biometric related to that Unique number is only needed for the transaction.For transaction done through NACH, this payment bridge is used.
NACH is more secure-
As RBI has given security guidelines to all the banks for security purposes.For maintaining secure transaction of the customers. While this NACH system could be vulnerable to many attacks like-Salami Attack.This attack works as in deducting a minor amount form multiple sources.For example- If a little amount is stolen from an employ’s salary like 2$, and this amount is stolen from every employs salary thus this could lead to the huge amount stolen by an attacker.As all banks have Complied with PCI DSS which is Payment Card Industry Data Security Standards so this makes our banking system more and more secure.
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