The history of automated payments in India started with Electronic Clearing Service (ECS). ECS was a revolution when it was introduced, and it was able to replace a lot of manual work, especially in salary and pension disbursements. As demand increased, ECS became inadequate to meet the needs.
So, then NACH (National Automated Clearing House) was introduced. NACH payment refers to the automatic debit of funds from one bank account and credit to another bank account without manual intervention. You can avail the service by filling in the NACH mandate form. NACH is faster, easier, and entirely online.
NPCI National Payments corporation of India created NACH to make periodic payments easier. Banks, corporates, companies, governments, and even mutual fund houses and brokers can make use of NACH to make handling payments easier.
Once you sign the NACH mandate and the same is presented to the bank, payments will be automatically deducted from your account every month.
For example, if you start an SIP with any Mutual Fund, you will have fixed monthly instalments on a fixed date, so the amount will be automatically debited every month on a fixed date. Your effort is limited to keeping the fixed amount so that the bank can remit in time. As far as the bank is concerned, the process is automatic until the end of the NACH period.
NACH payment mandate gives an entity the right to withdraw a certain amount of money from your account till the date it’s cancelled. This enables the automatic payments that were mentioned above.
You can cancel or modify the NACH mandate. It has to be noted that the bank take time to honour your request.
Charges related to NACH may vary for different Banks. If a NACH mandate or a payment request is failed due to insufficient funds, the bank may charge a penalty for the same.
NACH is one of the most helpful payment tools that save corporates and individuals time and money. Ensure you read your NACH mandate carefully before signing to ensure the details are correct.