Does your credit card bill gets automatically paid every month? If yes ! you must be using the NACH facility. I also use NACH service to pay credit card bills, electric bill and SIP. In fact, you can use this facility for all the recurring payments.
Uses of the NACH
The NACH is used when you have to pay an amount regularly to a institution. You can use it in the following cases.
- SIP of Mutual funds
- Bill payments for the electricity and water
- Credit card bill payment
- Home loan EMI Payment
The Nach Payment by the customers to the institution is termed as NACH Debit. Whereas if an institution uses NACH for regular payments to many users, it is called as NACH credit. The NACH credit is used in the following cases.
- Salary distribution among Employees
- Dividend to Shareholders
- LPG Subsidy to customers
Features of NACH
The NACH stands for National Automatic Clearing House. This clearing house is managed by the National Payment Corporation of India (NPCI). The IMPS and UPI services are also managed by the same institution. The RBI regulates the activities of the NPCI.
The NACH is used when you have to pay repeatedly. You can fix the payment schedule, for example, weekely, fortnightly, monthly, yearly. You can also select the Payment as per the demand.
The payment should be made to an organization or Made by an organization. The organization should have the corporate account with a bank to avail this facility.
The NACH facility can’t be used among the friends and family. In this case, you should use the standing instruction.
For using the service of the NACH, you have to give one time mandate for the regular payments. The mandate can be physical as well as in the electronic Form.
Once, you give the mandate, the corporate can withdraw the specified amount without bothering you. The electricity distributor would debit the monthly electricity charge and the bank would withdraw the credit card billed amount.
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Benefits of National Automatic Clearing House
- Very fast service. It has reduced the timeframe of the regular payments.
- Stress-free Repeat Payments. You can focus more on productive work.
- Reduces Paperwork and several cheque writing.
- It helps in timely bill payment. You would never miss the payment.
- No need to give Post dated cheques for EMI or SIP.
- The government is today promptly crediting many types of subsidy because of the NACH.
- The dividend goes directly to bank account soon after the record date.
NACH is an Advanced Version of the ECS
You would recall that ECS was also giving a similar facility. In that system, you have to fill the physical form to avail the recurring payment facility. Whereas, in the NACH, you can give both the physical as well and electronic mandate. There are some benefits of NACH over the ECS.
The NACH mandate takes far less time to be effective. It takes maximum 10 days while ECS used to take about 30 days. Because of the NACH, now you SIP mandate is implemented within 15 days. Earlier you have to wait at least for a month.
The NACH mandate gives the tracking facility. It was not possible with the ECS. The NACH allots a unique mandate reference number (UMRN) to every transaction for tracking the payment.
Because of the UMRN, there is far less probability of non-credit.
The NACH settles the payment the same day after the presentation of the bill. The ECS used to take 3-4 days for the settlement.
It has developed an electronic dispute management system. There was no such system with the ECS.
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The mandate of the NACH
The NACH is used for regular payments. You are not required to issue cheque or transfer funds every time. Instead, you have to issue a one-time mandate for the regular NACH payments.
The NACH mandate form is similar to the normal cheque. But it asks more information for effective and foolproof implementation of the mandate. You have to specify follwing inforamtion in the NACH mandate along with your signature. The sample NACH Form is given below.
- Bank account number
- Bank name
- IFSC or MICR
- Payment Debit type – Fixed or Maximum
- Debit type
- Maximum Amount
- Period From, to or until canceled.
- Signature with name
Debit Type and Period
In the form, you have to select the ‘ Debit Type’. You must decide the ‘Debit type’ carefully. If you are paying the same amount repeatedly, you should use the ‘Fixed Amount’ Debit Type. It ensures that the debit from your account would remain the same in the future.
While you should use the Maximum amount for the Bill payments as billed amount changes. In this case, you set an assumptive maximum amount. The biller would not be able to withdraw more than the specified limit. Fix this amount after the due consideration. The very low limit would create hassles instead of convenience.
Period For Mandate
You have to also decide a start and end date of the NACH mandate. The tenure should be fixed for EMI payments. But you can keep it ‘Until canceled’ in the case of Bill payments. If you choose a shorter period, you have to again give the mandate.
E-Mandate of NACH
Normally, people give madate for the NACH through the physical slip. But now you can give the E-Mandate as well. This is done through the netbanking or debit card.
The institutions which give e-Mandate facility, ask all the information online and takes your consent through the net banking. Besides netbanking, you can also use the debit card to give the E-mandate. Earlier, Aadhhaar authentication was also used for the Mandate but, the NPCI has stopped it.
You can use the E-mandate, only if the institution has made an arrangement with the bank.
How do you Stop or Modify the NACH Mandate?
The process to stop/modify a NACH Mandate is the same as the creation of the Mandate. You have to use the same form for canceling the existing Mandate. But in this case, you must enter the UMRN. You would get this UMRN from the organization. You can also check out the bank statement for the NACH. Some Banks mention the UMRN in the statement. If you are seeing the same number for the repeat payments, it would be UMRN.
You have to fill other details of your mandate. However, I don’t see any necessity for canceling the mandate. But you must give it to avoid any complication.
NACH mandate Charge
You would be wondering whether there is any charge for the NACH facility. Your concern is right as there are no free lunches. However, in this case, your lunch is sponsored by the institution. In both the cases NACH Debit and Credit, the institution or corporate pays the charge.
The charges for each debit and credit does not exceed 50 paise. While NPCI charges ₹1 for every mandate. The charges are lower if the transactions take place within the bank network.
SBI Card NACH Payments
You can use the NACH mandate for paying SBI Credit card bill as well as the SBI home loan EMI.