Electronic Clearing Services (ECS Credit)
Known as a “credit-push” facility or a one-to-many facility, this method is primarily used for large-value or bulk payments, where payments from the paying institution are credited to the recipient’s account. is deposited.
Such payments are made from time to time such as one year, half-year, etc., and are used to pay salary, dividend, or commission. Over time it has become one of the most convenient ways to make big payments.
Electronic Clearing Services (ECS Debit)
Know as the many-to-one or “debit-pull” facility. This method is primarily used for small-value payments from consumers/individuals to large organizations or companies.
It eliminates the need for paper and instead makes payments through banks/corporates or government departments. It facilitates personal payments such as telephone bills, electricity bills, online and card payments, and insurance payments.
Although easy this method lacks in popularity because of the significant lack of consumer awareness.
National Automated Clearing House (NACH)
Reserve Bank of India offers Electronic Clearing System (ECS) for faster payment and collection. ECS is an electronic mode of payment/receipt for transactions that are repetitive and periodic in nature.
By repetitive and periodic, it means that the transaction is repetitive and after a certain time interval. But ECS lacks some things like it takes around 30 days to get activated after submission of required documents, is it regional-based, etc.
To overcome the problems faced by ECS, the National Payments Corporation of India (NPCI) came up with another system called the National Automated Clearing House (NACH).
NACH is a centralized system, initiated with the objective of integrating multiple ECS systems operating across the country and providing a framework for harmonization of standards and practices and removal of local barriers/bottlenecks.
It intends to provide a single set of rules (operation and business), open standards, and best industry practices for electronic transactions that are common to all participants, service providers, and users, etc.
Like ECS, NACH is also an electronic mode of payment/receipt for transactions which are repetitive and periodic in nature. NACH system is used by institutions for bulk payment of amounts or bulk collection of amounts.
Examples of bulk payment of amounts include automatic payment of interest, salary, pension, etc. by organizations.
Examples of bulk collection of amounts include automatic payment of telephone/electricity/water bills by citizens of the country, cess/tax collection, loan installment repayment, periodic investments in mutual funds, insurance premiums, etc.
Like ECS, NACH has both debit and credit modes.
Direct loans, which include disbursement of salaries, pensions, dividends, interest, etc., to the stakeholders concerned at stipulated frequency and tenors, and
Direct Debit, which makes regular fixed payments towards insurance premiums, loan repayment, recurring deposits, etc.
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