Understanding National Automated Clearing House (NACH)

By Sanesh Mathew | March 30, 2018

What is NACH and how does it work? Read on to understand more about NACH.

Understanding NACH

The centralised payment/transaction processing system by the National Payments Corporation of India (NPCI), National Automated Clearing House (NACH), lets you simplify and manage bulk payment across multiple banks and manage payments of utility bills, SIPs, premiums, donations, Credit Card bills or any other recurring payment.

NACH has been set up to serve as a faster and efficient platform for clearance. Use NACH to manage your payments easily and cost-effectively.

What is NPCI?

The NPCI or National Payments Corporation of India was formed by the Reserve Bank of India (RBI) in collaboration with the Indian Banks Association and ten promoter banks. The ten promoter banks are SBI, ICICI, HDFC, PNB, Citi, HSBC, Canara Bank, Bank of India, Union Bank of India and Bank of Baroda. NACH is NPCI’s product offering that aims to replace Electronic Clearing Service (ECS) systems across the country.

How does NACH work?

Here is the step-by-step process of how NACH works:

  • The corporate (or money-collecting agency) collects the NACH mandate form from customers. With the mandate form, the customer gives the corporate the authority to debit his account for a certain period and at a certain frequency.
  • The corporate verifies the details provided by the customer in the mandate form.
  • After verification of details, the corporate forwards the NACH mandate to its bank.
  • The corporate’s bank then shares the NACH mandate with the NPCI.
  • Once the information is validated, the NPCI forwards the mandate to the customer’s bank for approval. Only fully validated transactions are forwarded to the customer’s bank for debiting.
  • Once approved by the customer’s bank, the corporate is authorised to collect funds from the customer’s account.

Difference between NACH and ECS

Since NACH aims to replace the existing ECS systems, let us discuss a few differences between the two systems.

  • ECS is a manual process and, thereby, takes a lot of time and faces verification issues. In NACH, the workflow is defined and this helps save a lot of time.
  • Unlike ECS, NACH provides a unique mandate registration reference number which can be used for future reference.
  • NACH involves less paperwork, so the rejection ratio is less as compared to ECS.
  • With NACH, your payment gets settled on the same day, while ECS takes 3 to 4 days for the same.
  • NACH features a dispute-management system, which will resolve your issues easily, while ECS has no such systems in place.
  • NACH registrations take only 15 days, while ECS registrations take up to 30 days.

A few more features of NACH

  • Incorrect details such as your bank account number, folio number, etc. can result in your NACH getting rejected.
  • NACH can also be rejected if the investor’s bank is not a part of NACH.
  • You just have to submit the cancellation form to stop NACH any time.
  • There is no limit on how many NACH mandates you can register.
  • The default NACH mandate has been set to 31/12/2099.

With its nationwide reach, same-day debit realisation, multi-level security measures and future-ready technology, NACH is here to transform the payment landscape in India. Its pan-India availability not only makes it a cost-effective solution, but it also provides corporations access to each and every one of their customers across the country.

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Category: Banks money transfer

About Sanesh Mathew

A talkative sleepyhead, Sanesh, enjoys watching horror movies, listening to music, reading all things related to personal finance and wandering aimlessly (walking meditation, he calls it!). He refers to himself as a 'simple human being with a rather chaotic mind'.

33 thoughts on “Understanding National Automated Clearing House (NACH)

  1. Nagnath Gore

    NACH Mandate Amount and EMI Amount can be different ??? or it should be same.

    Reply
    1. Team BankBazaar

      Hi Nagnath, NACH is basically a payment processing system which makes it easy for you to make repeated payments such as your Loan EMIs. There will be no difference between the amount mentioned in your NACH mandate and your actual EMI. Cheers, Team BankBazaar

      Reply
  2. DP

    I took personal loan from a bank and they sent NACH mandate to my account holding bank. Do i need to fill any form and submit to my bank in order to approve it or my account holding bank will approve it and send me a confirmation message?

    Reply
    1. Team BankBazaar

      Hi DP, Your bank will approve it. You can always call the customer helpline of your bank and confirm this in case you have any doubts. Cheers, Team BankBazaar

      Reply
  3. sandeep khanna

    I have an account with state bank of India, am getting my firm enrolled with indiamart, giving them an undertaking that Rs 3000/- will get deducted from my account through NACH, for coming six months, in case I wish to discontinue my contract with Indiamart, how can I stop the payment? I have tried calling SBI Customer care helpline but it is of no use.

    Reply
    1. Team BankBazaar

      Hi Sandeep,

      When you decide to discontinue your contract with Indiamart, you will need to intimate your bank immediately so that they can stop future payments. You can intimate them by calling their customer care or by emailing them. You can also visit the nearest bank branch.

      Cheers,
      Team BankBazaar

      Reply
      1. manoj

        so I have called the bank customer care, but they are telling to take no objection certificate from indiamart for cancellation.

        Reply
        1. Team BankBazaar

          Hi Manoj,

          Thanks for stopping by. As the concerned bank has requested you submit the No Objection Certificate from Indiamart, we suggest you get in touch with them at the earliest. Hope this helps!

          Cheers,
          Team BankBazaar

          Reply
  4. sandeep khanna

    I had called up SBI customer care number but in their menu there is no option under which query regarding NACH can be
    discussed, what is the email ID of SBI on which we can send our email, their branch staff doesn’t know the exact email ID or how to stop the payment

    Reply
    1. Team BankBazaar

      Hi Sandeep,

      Please visit another SBI branch to get details on their website or call up customer care.

      Cheers,
      Team BankBazaar

      Reply
  5. SUDHANSU SEKHAR MAHALIK

    Dear Madam/Sir,
    Pls tell me, is the child plan insurance mode of payment through NACH possible?

    LIC is denying that child plan is not possible for mode of payment through NACH for same i requested to give such provision and any circular but they are remaining silent.

    pls tell me

    Reply
    1. Team BankBazaar

      Hi SUDHANSU SEKHAR MAHALIK,

      It is best to check this with LIC as we are not sure why this may seem like its not possible.

      Cheers,
      Team BankBazaar

      Reply
  6. BK Whig

    If i submit online NACH form with cancelled cheque for SIP, the bank will deduct first time some initial charges /amount ?
    or
    There is no deduction by bank to submit this NACH form .

    Reply
    1. Team BankBazaar

      Hi BK Whig, Usually there are no charges for the NACH mandate. Please check with your bank. Cheers, Team BankBazaar

      Reply
    1. Team BankBazaar

      Hi Mack,

      Yahoo Finance website publishes our articles at regular intervals. They have also given credit to our writer on their website.

      Cheers,
      Team BankBazaar

      Reply
  7. Deepak patel

    Can we cancel nach mandate of insurance policy directly through our bank without visiting insurance company

    Reply
    1. Team BankBazaar

      Hi Deepak patel,

      You can cancel your NACH mandate by visiting the bank.

      Cheers,
      Team BankBazaar

      Reply
  8. sunil

    March 15, 2018
    I took personal loan from a bank and they sent NACH mandate to my account holding bank. how much time it will take to approve the same? so that amount will get disbursed to my account

    Reply
    1. Team BankBazaar

      Hi Sunil,

      NACH mandates usually take approximately 10 days for the amount to be disbursed to your account.

      Cheers,
      Team BankBazaar

      Reply
  9. sunil

    March 15, 2018
    I took personal loan from a bank and they sent NACH mandate to my account holding bank. how much time it will take to approve the same? so that amount will get disbursed to my account. please clarify me

    Reply
    1. Team BankBazaar

      Hi Sunil,

      NACH mandates usually take approximately 10 days for the amount to be disbursed to your account.

      Cheers,
      Team BankBazaar

      Reply
    1. Team BankBazaar

      Hi Sahil,

      Thanks for writing in to us. If you’d like to stop your NACH mandate, you will have to write to your bank mandating the same. Please get in touch with your bank and check with them if you have any queries.

      Cheers,
      Team BankBazaar

      Reply
    2. Team BankBazaar

      Hi Sahil,

      Thanks for writing in to us. If you’d like to stop your NACH mandate, you will have to write to your bank requesting the same. Please get in touch with your bank and check with them if you have any queries.

      Cheers,
      Team BankBazaar

      Reply
  10. GANESAN P

    Dear Team,
    Request your inputs s on area to ‘Simplify’, ‘Automate’, ‘Centralize’ in NACH..
    pl mark the mail Process of simplification in NACH…
    still we have using Manuel form (handwriting ).pl confirm system process idea… and any suggestion of advance mode or simplify process details.. Tq..

    Reply
    1. Team BankBazaar

      Hi Ganesan,

      Thank you for your inputs! We’ll cover the requested topics in an article soon! Keep reading our blog for more insights into the world of finance!

      Cheers,
      Team BankBazaar

      Reply
  11. Sunil

    I have a idbi account
    And ACH transaction of 8800 is done on
    10 of july, 2020 but the debited amount is credited to my account in
    UCO account
    on 13 july, 2020.

    I am to ask who will bear the interest that is for two days.

    And if this is the case then in a year there are many public holiday and who will pay for that.

    Reply
    1. Team BankBazaar

      Hi Sunil,

      Banks take time to facilitate transfers from one account to another. No interest will be payable by the bank neither because of this nor on account of public holidays.

      Cheers,
      Team BankBazaar

      Reply
  12. Ashwini Kumar

    Hi team,

    I have nach mandate registered for my policy while purchasing my policy and after that i have paid the premium in advance for the next year.
    I am confused whether the amount gets deducted again because i am getting message that please maintain sufficient balance in the account on renewal date.

    Reply
    1. Team BankBazaar

      Hi Ashwini,

      The amount will be deducted again from your account since you have not requested your bank to stop the NACH mandate. Please do so at the earliest to avoid this.

      Cheers,
      Team BankBazaar

      Reply

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