The National Automated Clearing House (NACH), introduced by the National Payments Corporation of India (NPCI), is a centralized electronic platform for processing high-volume, low-value transactions between banks. It aims to streamline repetitive and periodic payments, offering both credit and debit functionalities for corporates, banks, and financial institutions. NACH is considered a significant improvement over its predecessor, the Electronic Clearing Service (ECS).
Key Features of NACH
- Wide range of transactions: NACH facilitates various transactions, including salary and pension disbursements, subsidy distributions, dividend payments, utility bill payments, loan repayments, mutual fund investments, and insurance premium payments.
- Paperless Mandate Registration: Launched in March 2017, NACH allows corporates to register mandates electronically for customer accounts, eliminating the need for physical paperwork.
- Faster Processing: NACH boasts a faster registration process compared to ECS (15 days vs. 30 days) and provides a unique Mandate Registration Reference Number for future reference.
- API-based e-Mandate Process: NACH offers a web-based e-mandate registration process using APIs. Customers can choose their bank and authenticate themselves via net banking credentials or debit cards.
Membership and Governance
NPCI categorizes NACH system members into three groups:
- Sponsor Banks: These banks initiate transactions within the system. They must have a mutual agreement with NPCI and be members of an RBI-approved payment system.
- Destination Banks: These banks receive transactions, process mandates, and update Aadhaar mapping within the system. All banks participating in any RBI-approved payment system can become Destination Banks upon agreement.
- Users: Government departments and corporates can participate as Users after submitting an agreement with their Sponsor Banks. They specify the Sponsor Banks where they maintain accounts for settlement purposes.
NPCI maintains a transparent system by notifying all members about additions, suspensions, or terminations within the NACH network.
Comparison with ECS
NACH offers significant advantages over its predecessor, ECS:
- Faster registration process
- Paperless mandate registration
- Faster transaction processing
- Improved user experience with API-based e-mandate process