There was a time in the past when people had to stand in queues to make their bill payments on time, before the due dates. It was mandatorily expected from every individual availing of the respective services, such as electricity, water, etc. Paying off bills manually and remembering the due dates consume a lot of time and effort, which is not at all acceptable in the digital era.With the introduction of the ECS mandate, we streamlined recurring bill payments and bridged the gaps to make the process easier. In this article, you will get a better insight into how ECS mandates have evolved, how people look at recurring payments, and how effective it is in the modern digital payments era.
Understanding the Purpose of the ECS Mandate
Electronic Clearing Service or ECS is the electronic method of payment used for periodic or recurring transactions. RBI introduced it to streamline the process of transferring bulk funds from one account to another.
NPCI, administering NACH, is the authority managing the ECS mandates in India. Businesses and other institutions prefer using ECS to authenticate bulk payments for paying off dividends, pensions, salaries, interest, and others. If not, then ECS can also be used for collecting the payments, such as utility bills, tax payments, pensions, and loan payments.
To better understand this, if you are taking a loan, there will be a fixed EMI that you have to pay back every month. Now, when those payments get delayed, you will have to bear penalties and also experience a reduction in your credit score. Therefore, the ECS mandate can be integrated into the loan repayment scheme to deduct the specified amount automatically every month.
With this, the EMIs will be debited from the customer’s account every month. Thus, this is how the ECS mandate works!
Different Types of ECS Mandates
ECS mandate is mostly categorized into two different types, which include ECS Debit and Credit.
ECS Credit is the type of mandate when any organization or institution deposits or credits money to your bank account every month. May it be salary, dividend, pension, or anything else. It is called the ECS credit.
ECS Debit, on the other hand, is a specific amount that has been auto-deducted from the account as recurring payments. It applies to cases such as EMIs, credit card bills, digital subscription renewal fees, utility bills, and others. ECS debit is meant to save time & effort for customers.
Based upon the geographic location of the bank’s branches, RBI has also categorized ECS as local ECS, national ECS, and regional ECS. The local ECS facility works across 81 centers in India, regional ECS works only at 9 centers around the country, and national ECS is centralized and based in Mumbai.
Different Benefits of ECS For Both Banks and Customers
For you to better understand the capabilities of ECS, here are its benefits associated with customers and banks:
For Banks:
1. With the introduction of the ECS mandate, banks now have to process fewer documents for sanctioning loans or providing customers with credit facilities.
2. Once the bank activates the ECS mandate, there is not much they have to do from their end. All banks must do is match their key particulars, such as account number and name. Following this, we will credit the amount.
3. There’s no chance of any error because if the customer’s details aren’t validated within the verification criteria, then the ECS process will be terminated right away.
4. We keep a record of almost every transaction made through an ECS mandate. Thus, the bank maintains enhanced transparency between itself and the customer.
For Customers:
1. Customers don’t have to worry about manually crediting the bills or installments to the biller or lender’s account. ECS will ensure that the amount gets debited with your consent from your saving account and automatically gets credited to the billers’ or lenders’ accounts.
2. The system will also credit the transferred amount faster without manual intervention. We will credit the amount and update the payment status in less than 3 to 4 working days.
3. The customers won’t have to visit the bank or any bill payment hubs to process the monthly amounts or deposit the cheques.
One-time authentication authorizes the deductions, which will continue until the payment tenure lasts.
4. The ECS mandate eliminates the possibility of fraudulent transactions. Thus, the security and safety aspects are top-notch, with automated recurring payments initiated through this approach.
For Institutions or Organisations:
1. Companies and institutions often deal with bulk payments to many individuals or vendors. Therefore, the ECS mandate helps them streamline such transfers on specified due dates without the need for manual processing. Thus, the payments take place smoothly.
2. In addition to that, the number of people required in the workforce will be much less, as manual dispatching of payments or printing reports isn’t needed anymore.
Process of Setting Up An ECS Mandate
If you intend to set up an ECS mandate, you must contact your bank, which will guide you with the necessary steps. To help you get a brief idea, here are the steps that your bank might ask you to follow to avail the ECS mandate benefits:
1. Banks will provide you with an ECS mandate form, which you must complete with accurate details. The form will be an application and proof that you authorize the bank to process ECS debit or credit transactions on your behalf.
2. The ECS form will consist of relevant information about the customer or organization, such as bank account details, name of the payer/payee, date, and the frequency of credit or debit that will happen. A signed ECS mandate form will be the official document that proves the authorization.
3. We will ask you to set a maximum limit beyond which we cannot debit your account through the ECS mandate authorization.
Ensure to know the funds being debited or credited and keep track of the payments made through the process.
4. With every transaction made through the ECS mandate on your account, the bank will send you an SMS to notify you. All the transaction details will be provided to you for every debit or credit to keep you in the loop of this process.
Things to Consider When Preferring ECS Mandate
Here are a few of the things that you should keep in mind while enrolling ECS mandate for your transactions:
1. Ensure you have sufficient balance in your account if setting up ECS debit. It ensures you don’t have to pay bounce charges for missed payments.
2. Check the bank statement over time to ensure no inconsistency between the debited payment and the actual bill.
Set up a limit over the ECS debit to ensure you get a permission request for any fund transfer requirement exceeding the limit. If not, then the system should automatically decline the request.
Conclusion
So, these explain the purpose and efficacy of the ECS mandate towards automating funds transfer from one account to several other accounts. It is one of the most convenient yet proficient ways of collecting recurring payments of any volume. You can use it for almost all types of bulk payments, including pension, salary, interest, and others.
Not just that, but users can also avail of ECS services to set up auto-pay systems for loan repayments, mutual fund SIPs, insurance premiums, and other such monthly payments. If you want to know more about the ECS mandate and how you can avail of it, you can talk to a financial services provider to help you with the needful.
