National Automated Clearing House

National Automated Clearing House, or NACH, introduced by National Payments Corporation of India, is a centralised clearing service that aims at providing interbank high volume, low value transactions that are repetitive and periodic in nature. Offering credit and debit service to corporates, banks, and financial institutions, the service, aimed at integrating all regional ECS into one National Payment System, is claimed to be better than its predecessor, Electronic Clearing Service.[1]

"NACH" redirects here. For other uses, see Nach (rapper).

According to the service's website, "NACH System can be used for making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension etc. and also for bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium etc."[2]

In March 2017, NPCI via a circular notified a paperless way for corporates to register NACH mandates for its customers, which can be later used to debit customer accounts.[3]

Electronic Clearing Service

Electronic Clearing Service, or ECS, is an electronic clearing service that facilitates funds transfer between bank accounts. The service was started by Reserve Bank of India providing, both, debit and credit which can be used to pay utility bills.[4]

API based E-mandate Process

User can authenticate a NACH API E-mandate on the web. The customer gets directed to the NPCI website, where customer has to choose their bank, and then authenticate via one of the two methods - 1. Net banking credentials 2. Debit card.[3] Kotak Mahindra Bank became the first bank to allow customers to choose both methods for authentication.[5] Since then, 38 banks allow customers to authenticate API based e-mandates as of September 2019.[6]

API based E-mandate process is expected to make the process fast, frictionless and paperless.[7]

Membership

NPCI has categorised members of NACH system in three entities:

Sponsor Banks are allowed to originate transactions the system required, they have a mutual agreement with NPCI and also are members of any payment system approved by the Reserve Bank of India.

Destination Banks are allowed to do transaction, process mandates and update the Aadhar mapper through the use of the system. On necessary agreement, all the banks that are members of any payment system participate on NACH system as Destination Banks.

The corporate/government departments, on submission of necessary agreement with their Sponsor Banks, participate on NACH system as Users. For this, to facilitate settlement on their behalf, the departments indicate the names of the Sponsor Banks with whom accounts are maintained.

NPCI notifies all of the members if a new member is added to the NACH network or if suspension or termination of a NACH member occurs.[8]

Comparison with ECS
  • Registration for NACH takes approximately 15 days over ECS taking 30 days for registration.
  • For future reference, NACH provides a unique number called Mandate Registration Reference Number.
gollark: > I explained medicine...You did not explain how you're meant to produce medicine without much/any technology.> communication + human interaction I also explained with internet 2That is just a fibre network. You need to produce hardware somehow.> lighting is also explained. Ever heard of a fire?Fires are inefficient and bad.
gollark: Shelter, medicine, communication, lighting, human social interaction, etc.
gollark: There are things other than those which matter? Also, subsistence farming is kind of no?
gollark: Oh, so you assume anarchocapitalism will magically lead to hyper-advanced technology which will allow you to trivially make anything at home.
gollark: Why would cities not be needed? They seem useful for, well, having people work close together to save on commute times, I guess?

References
  1. "Banks switching from ECS to NACH, here is what you need to know". The Financial Express. 2016-06-29. Retrieved 2017-11-22.
  2. "National Automated Clearing House Product Overview". NPCI. 2017-03-31. Retrieved 2017-11-22.
  3. "API Based E-mandate process" (PDF). NPCI.
  4. Jaleel, Tania Kishore (2011-07-08). "What is Electronic Clearing Service (ECS)?". Business Standard India. Retrieved 2017-11-22.
  5. "Kotak Bank launches debit card-based e-mandate on NPCI's API platform". @businessline. Retrieved 2019-10-04.
  6. "Bank status in API E-Mandate" (PDF). NPCI.
  7. www.ETtech.com. "RBI eMandate nod paves way for auto-debits by fintech firms - ETtech". ETtech.com. Retrieved 2019-10-04.
  8. "National Automated Clearing House (NACH) Procedural Guidelines" (PDF). NPCI. Retrieved 30 November 2017.
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.