National Automated Clearing House(NACH), a large scale payment system operated by NPCI (National Payments Corporation of India ) ease one-to-many credit transfers such as payment of dividend, interest, salary, and pension.
NACH has come out as a popular and important mode of direct benefit transfer(DBT) to a large number of beneficiaries.
RBI on Friday announced that NACH will be operational 365 days a year, effective from 1 August 2021.
NACH also facilitates the collection of payments of electricity gas, telephone, water, periodic installments towards loans, investments in mutual funds and SIPs, credit card bill payments, and insurance premiums.
To further enhance customer convenience and to leverage the 24×7 availability of RTGS, NACH which is currently available only on bank working days instead, is to be functional in the interest of customer’s convenience is proposed to operate on all days of the week effective from 1st August 2021. RBI Governor Mr. Shaktikanta Das said while announcing the bi-monthly monetary policy revenue.
NACH introduced by NPCI is a centralized clearing service that aims at providing interbank high volume, low-value transactions, that are repetitive and periodic in nature and requires day to day transfers.
This has helped the transfer of government subsidies during the current Covid-19 phase in a timely and clear manner to needy people, reports RBI.
Advanced version of ECS (Electronic Clearing System)
In ECS one has to fill the physical form to avail the recurring payment facility whereas, in the NACH, one can give both the physical as well as an electronic mandate.
The NACH mandates take far less time to be effective. It takes a maximum of 10 days while ECS used to take about 30 days. NACH gives a tracking facility as this was not possible with ECS. The NACH allots a Unique Mandate Reference Number(UMRN) to track every transaction one makes. The NACH settles the payment on the same day after the presentation of the bill. While ECS used to takes 3-4 days for a settlement.
In its statement on the development and regulatory policy RBI.
NACH a system operated by NPCI and is used to register SIPs with banks. According to experts, the new rule will importantly cut down the processing time taken for SIP registration and said it will be a welcome move for investors to register for SIPs through NACH, as will speed up the process with the new rule and convenient for them to operate 24×7 effectively as if now smaller banks or nationalized bank takes longer time for registration. As if the hassle-free process will enable more and more SIPs registration and will induce people and to save more.