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Electronic Clearing Service (ECS) Mandate: Types, Benefits, and Charges
27 June 2022
Keeping track of every payment made on a particular date can become tiresome in today’s fast-paced world. ECS or Electronic Clearing Service was developed to assist with this need. Since the implementation of the ECS Mandate, keeping track of payments and making recurring payments has become easier. Institutions can also use ECS to make payments such as dividend interest distribution, salary, and pension distribution, as well as to facilitate payments to various clients.
In this blog, we will explore the types of ECS mandates, its benefits, and how the ECS mandate functions.
What is the ECS mandate?
The Electronic Clearing System (ECS) transfers funds electronically from one bank account to another and can be used for credit or debit transactions.
ECS can also be used to make equated monthly installment payments on loans and SIP investments. It includes transactions processed under the National Automated Clearing House (NACH), run by the National Payments Corporation of India (NPCI).
Types of ECS Mandate
Here are some types of ECS mandate commonly used in India:
1. ECS Debit
ECS (debit) is commonly used by utility companies such as electricity companies, credit card companies, telephone companies, and others to receive bill payments directly from their customers’ bank accounts.
ECS (credit) is commonly used for bulk transfers performed by institutions to make payments such as dividends, interest, salary, pension, etc.
Based on the geographical network of bank branches, there are 3 types of ECS operated by the RBI. These are:
Local ECS is accessible at 81 centers/locations across the country. The branch coverage at each of these ECS centers is limited to the bank’s geographical coverage, typically one city and satellite towns and suburbs adjacent to the city.
Regional ECS is provided at 9 centers/locations throughout the country. Regional ECS enables coverage of all central enabled branches in a State or group of States and can be used by institutions seeking to reach beneficiaries within the State/ group of States.
National ECS is the centralized version of ECS Credit, which was introduced in October 2008. The Scheme enables the coverage of all core-banking enabled branches throughout the country.
How Does an ECS Mandate Work?
ECS mandate allows the clearing house to debit a particular amount or an EMI from your bank account and credit it to the payee’s account on a predetermined date. The clearing house debits the user’s account through the sponsor bank account and credits to the recipient bank accounts, allowing for onward credit to the accounts of the ultimate beneficiaries.
The beneficiary must provide a mandate indicating their consent to use the ECS service. When you apply for a loan, you are asked to sign an ECS payment mandate to automatically authorize the deduction of the amount on the predetermined date. Banks have been advised to ensure that the passbooks/statements issued to customers accurately reflect the transaction details provided by ECS users.
Benefits of ECS Mandate
Some of the benefits of ECS include:
With the electronic clearing service, the customer is relieved of the task of visiting the bank and depositing checks for recurring payments. The amount will be debited automatically on the due date if the customer has given the bank the mandate for ECS.
It assists the customer in systematically managing the debt because the customer can give multiple mandates for ECS for different debts, giving them the flexibility in managing their debts.
For bank/corporate or institutions
In ECS transactions, there are no extra paperwork at the crediting or debiting banks. This contributes to eliminating fraudulent encashment of instruments lost in transit and provides transparency.
ECS is advantageous to institutions receiving payment because it eliminates any default or delay from the debtor’s side since payment is received automatically by an electronic clearing service.
ECS users save money on administrative equipment for printing, dispatch, and reconciliation. This enables them to make payments and ensure that the beneficiaries’ accounts are credited on a specified date.
To avail of the ECS mandate, customers must notify their bank and provide an ECS mandate authorizing the institution to debit or credit the payments through the bank. The mandate includes information about the customer’s bank branch and account information. The bank will provide an ECS mandate form, which must be completed and signed as an official authorizing document.
It is the ECS user’s responsibility to communicate the following details:
The amount being credited or debited to the account
Date of the debit
The purpose of the debit
The validity period for each mandate
Other relevant payment details.
The bank will notify you that the money has been debited from your account via mobile alerts or messages.
Users can discontinue the ECS mandate at any time, completely at their discretion. There are two steps you must take to discontinue your ECS mandate:
The service provider, who is the payment recipient, must be given a written communication in the manner specified by them to discontinue the ECS services.
The bank, which is the payment channel, must be given a duly filled ECS cancellation form stating your desire to discontinue. The application must be given at least one week prior to the EMI debit date.
ECS Mandate Charges
The Reserve Bank of India has deregulated the fees charged for ECS transactions. Bank branches cannot charge processing or service fees for debiting or crediting customers’ accounts. However, the sponsor banks or the clearing house must disclose the ECS mandate charges, if any, transparently.
ECS mandate has given its users flexibility and transparency in their transactions. Instead of paying utility bills by cash or cheque payments, an individual or a company can make it through ECS. Suppose the company has the facility of payment through ECS. In that case, the client can mandate the company to automatically receive the utility bill amount from his bank account without any hustle.
FAQs on ECS Mandate
Q1. What is the full form of ECS?
Ans:ECS, or Electronic Clearing Service, is an electronic clearing system that allows for paperless credit / debit transactions that are linked to your account as well as a faster method of effecting periodic and repetitive payments.
Q2. What are the types of ECS mandate?
Ans:There types of ECS mandate include- ECS credit, ECS debit, local ECS, regional ECS, national ECS.
Q3. What can you do to withdraw the ECS mandate once given?
Ans: The mandate given is equivalent to a customer’s cheque. The only requirement of the scheme is that the customer notify the ECS user in advance so that the debits are not included.
Q4. Who processes ECS transactions in India?
Ans:ECS transactions are processed under the National Automated Clearing House (NACH) run by the National Payments Corporation of India (NPCI).
Q5. Is there any limit on transactions in ECS credit or ECS debit?
Ans: No, there is no limit on transactions in both types of Electronic clearing service or ECS
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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