NACH Mandate: Meaning, Types, Benefits, and More

Recurring payments are an integral part of our lives. Whether it is about paying health insurance EMIs, loan EMIs, or phone bills, no individual would want to miss out on any of these payments. But remembering each of these payables and their due dates is not easy as it may seem.

On the other hand, it was not easy for banks, corporates, or other financial institutions to ask for payments and get paid on time. NACH came up as a solution to this problem at both ends. Let’s uncover various aspects related to NACH.

What is NACH?

NACH stands for National Automated Clearing House. It is a centralized system developed by the National Payments Corporation of India (NPCI) to facilitate recurring, high-volume interbank transactions for banks, corporates, governments, and even financial institutions. It simplifies the payment transfer process by eliminating the need for manual intervention.

For example, if you offer an online content subscription service and a customer signs up for NACH facility, the monthly service charge will get automatically deducted from his/her account.

Objectives of NACH

NPCI launched NACH for the consolidation of multiple ECS (Electronic Clearing Service) systems running in the country. It provides a single set of rules and industry practices for all the participants, service providers, and users. With its national footprint, NACH mandate tends to remove local barriers and cover the core banking across the length and breadth of the country.

Other highlights of NACH implementation include:

• NACH system supports Aadhaar-based transactions related to financial inclusion measures implemented by the Government and banks
• It is based on the advanced technology that is capable of handling large volumes of recurring payments
• It also facilitates the member banks in designing and implementing their own products to address their specific needs and that of the corporates
• It also provides a secure and scalable platform for the participants to utilize file-based transaction processing capabilities
• Aadhaar Payment Bridge (APB) system of NACH also helps the Government and other agencies in making successful Direct Benefit Transfer under various schemes

What is the difference between ECS and NACH?

Before the NACH system, RBI introduced the ECS mandate to assist with recurring payments and allow electric debit and credit transactions from the consumer’s account at regular intervals. While NACH and ECS seem similar to each other, there are several differences between them.

The following comparison table highlights the differences between ECS and NACH:

ECS	NACH
Involves a manual process and takes a long time to settle the transaction amount	Involves an automated, quick web-based process
Does not provide any reference number	Provides a UMRN or Unique Mandate Reference Number to the users for future reference
Involves hefty paperwork and has a higher risk of rejection	Involves minimal paperwork and a hassle-free application process
Settlements may take up to four days	Settlements happen within a day
Does not have a dispute management system in place	Has a dedicated dispute management system in place
Registration can take around 25 to 30 days	NACH registration takes around one day (or by the end of the same day when the application is submitted)

More about the uses of NACH mandate

NACH mandate helps simplify the process of recurring electronic payments through a centralised framework across all Indian banks. It is primarily used in the following ways:

• Corporates and government bodies use NACH to transfer bulk payments with ease
• It also helps resolve issues related to settlement and payment disputes through its structured control system
• It enables businesses to process mass transactions and collect payments for utility bills, like electricity, water, insurance premiums, etc.

How does NACH mandate work?

NACH mandate uses Aadhaar card or PAN card details to facilitate recurring payments. Here’re the steps involved in the working of NACH mandate (assuming A to be a consumer and B to be a payment collector):

• Under NACH mandate, A receives the e-mandate form from B
• Once this form is submitted back to B, verification of loan details happens
• Post verification, B forwards the NACH mandate to the bank linked with NPCI
• Post verification of e-NACH, A’s bank account is set for use for easy repayment of EMIs via the auto-debit process
• After A’s bank approval of the mandate, the recurring payments will be allowed from his/her account
• A can also stop the NACH by submitting a cancellation request

What are the benefits of NACH mandate?

NACH comes with several benefits for different parties involved – be it organisations, banks, or end-consumers.

Benefits for banks

• Saves time as there is no need to clear cheques
• Helps in maintaining better relationships with the consumers based on quick approval of payments
• Easy to manage banking services
• Reduces the risk of fraud and theft
• Reduces risk of late payments

Benefits for corporates/organisations

• Simplifies the payment process by eliminating the need to clear high volumes of cheques
• Smooth customer interactions with easy bill settlements
• Easy to send money to a large pool of beneficiaries

Benefits for consumers

• Easy to handle recurring payments without delay
• Saves time as the transactions get settled within a day
• No need to remember the dates for different recurring payments
• User-friendly mandate cancelation process
• Safe and secure process backed by authentication using net banking credentials only

What are the types of NACH?

To facilitate smooth transfer of funds NACH mandates are classified into two types:

• NACH Credit

It allows the authorised businesses to transfer sizable payments directly into the bank accounts of a large number of beneficiaries. All the transactions are under the control of a centralized unit. Its most common use-case is for small and big organisations to distribute salaries to their employees.

• NACH Debit

It simplifies the process of collecting recurring payments from consumers, like bills and EMIs. It helps deduct funds automatically from the large pool of consumers in a secure manner. The payment collectors can also track NACH debit transactions online.

What is the difference between e-NACH and e-mandate?

Both e-NACH and e-mandates are online services that allow customers and businesses to manage recurring payments. However, there are differences between the two.

E-mandates are managed by individual banks, while NPCI facilitates e-NACH and covers more than 40 banks. If a user wants to sign up for e-NACH, he/she needs to fill an online form on the bank’s website and get it approved. For e-mandates, users need to complete a net banking transaction for authorisation.

Also Read: All About e-mandates in India

How to register NACH mandates online

Here are the steps involved to register a NACH mandate (for end consumers):

• The end-consumers need to visit their bank’s website to fill NACH mandate form
• After filling in the details, they will get redirected to the destination’s bank website
• At this step, they need to authenticate the request using net banking credentials
• Once the bank verifies the account number and other details, it can either accept or reject the mandate
• If the application gets accepted, the consumers will receive a UMRN and future transactions will be scheduled
• UMRN can be used to track the mandate details or to cancel the same if required

What are NACH mandate charges?

NPCI monitors and operates the NACH framework in India and charges a nominal fee to the banks and other institutions for this service. NACH mandate charges mainly depend on the volume of transactions and are not applicable for income tax refunds.

The following table reflects NACH mandate charges:

Also Read: E-NACH Mandates Equals On-time Payments for NBFCs

Banks with NACH

Given below is a list of banks that allow NACH services:

• HDFC Bank
• ICICI Bank
• Citi Bank
• State Bank of India

Who are the members of the NACH mandate system in India?

The following banking institutions are the members of NACH steering committee:

• Bank of India
• Bank of Baroda
• State Bank of India
• Punjab National Bank
• Central Bank of India
• Axis Bank
• Union Bank of India
• ICICI Bank
• HDFC Bank
• Yes Bank
• IDFC Bank
• Kotak Mahindra Bank
• Citi Bank
• Standard Chartered Bank
• Paytm Payments Bank
• Saraswat Coop. Bank
• LIC
• AMFI
• IBA

You May Also Like to Read: Government Mandate About GST-Compliant Dynamic QR Codes

NACH mandate application form

NACH mandate FAQs

Which banks provide NACH as a payment service?

All major banks in the country, HDFC Bank, Axis Bank, State Bank of India, etc. provide this service.

What is NACH mandate cancelation?

It refers to the process of removing automatic debit transactions linked to a user’s account. If your business requires automatic payment collection via NACH mandate, you must provide your customers the option to cancel the mandate.

How can I check the NACH mandate status?

To check the status, a user needs to sign in to the net banking account with a bank and look for ‘Service Request’ to find the details of the NACH status.

What is NACH payment?

It refers to the amount transferred from one account to another without manual intervention through NACH mandate.

Is NACH mandate safe?

NACH is facilitated by the NPCI and is completely safe for both consumers and businesses.

How is NACH useful?

NACH is useful as it provides:

• Direct Corporate Access (DCA) to companies and government bodies
• A single platform for all banks to process payment transactions via NPCI
• Unique system to handle disputes and settlement issues related to online transactions
• Automated money transfer facility

Where is the NACH mandate used?

NACH can be used for mass money transfer, auto-debit of loan EMIs, instant loan transfer, and salary disbursal.

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