Things To Know About ECS Service

By Saroni Chakravarti | November 10, 2018

ECS or Electronic Clearing Service is a common form of transferring funds from one bank account to another, but as a concept, it is also mired in confusion. We’ll clear the air here.

 Things To Know About ECS Service

According to a Credit Suisse report, digital payments in India is set to hit a landmark high of $1 trillion by 2023. The report indicates that the entry of global players like WhatsApp will expand the segment and contribute towards this massive growth. This year in May, mobile transactions also hit a record high of Rs. 14,170 crore, according to data released by the Reserve Bank of India. Experts credited this to a host of offers like cashbacks etc. that mobile wallet providers offer every now and then in order to promote online/digital transactions. While there may have been a sudden surge in mobile payments, it has not diminished the importance of a payment system like Electronic Clearing Service (ECS). There are however, a couple of things that one must bear in mind before opting for this method of funds transfer.

What is ECS?

Remember how we keep telling you that the best way to maintain a good Credit Score is to never miss your due payments? And to help you do just that, you can automate your payments every month? Well, you can automate your investments using ECS. In other words, ECS is a service that banks offer to enable customers to transfer funds from one bank account to another electronically. ECS as a mode of payment comes handy when you have to make payments periodically, like SIP investments or repayments on a loan or Credit Card. In fact, ECS can be used for both credit and debit purposes. However, you have to ensure that there are adequate funds available in your bank account before your scheduled payment date.

ECS can be primarily of two types:

  1. ECS credit
  2. ECS debit

Additional Reading: Cheque – The Fallen Hero of the Banking World

ECS credit is when an institution credits an amount to your bank account, like what happens in the case of salary and dividend payments. And examples of ECS debit include instances when you choose to make recurring payments like EMIs towards your loans or SIP payments towards your investments etc. This takes the pain away of writing multiple cheques every month and reduces the possibility of missing your payment deadlines.

Additional Reading: How To Use Digital Wallets Effectively For Online Transactions

How to do you set up ECS for your bank account?

To set up ECS payments for your bank account, you should inform your bank first. Your bank will give you an ECS mandate form that you will need to fill out. This form acts as documented proof that you have authorised your bank to debit or credit payments. The mandate will contain details of your bank branch and other mandatory account details. While filling out the form, you can clearly specify the maximum amount the bank should debit from your account, mention the purpose of debit, and set a validity period for every mandate that you’ve given to the bank. Every time an amount gets debited from your account, you will receive either an SMS or email alert from your bank communicating that the transaction has been completed and specifying other relevant details of your transaction.

Are there any processing fees or service charges involved in ECS transactions?

ECS transactions involve no fees following the RBI’s directive that has mandated that sponsor or beneficiary banks cannot charge customers for ECS transactions.

However, charges might be applicable for participating banks. Originating banks (banks from where the amount is getting debited) as per RBI directive need to pay a nominal charge of 25 paise and 50 paise per transaction to the clearing house and the destination bank respectively. Bank branches do not usually levy processing/service charges for debiting the accounts of customers maintained with them.

Additional Reading: Internet Banking – The Pros And Cons

When can you stop payments through ECS?

To stop an ECS, you will need to inform both your bank as well as the beneficiary of such payments in advance with a written application. This will ensure that they have adequate time to take the necessary steps.

While ECS transactions will reflect in the mandate given by you in terms of the quantum of payment and its date, remember to monitor your bank statements regularly to ensure that there is no mismatch between your given mandate and the amount that is being debited every month from your account.

If you’re finding it hard to keep a track of your payments and investments, you can count on our mobile app and rest easy. From the latest in the world of finance to the ever-changing fuel rates, stay in the know even on the move with the BankBazaar mobile app.

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Saroni Chakravarti

About Saroni Chakravarti

Saroni loves all things quaint and old world- be it art, music or cinema. She has a special knack for spotting the weirdest traits in people and can't for the life of her understand why she attracts the worst co-passengers. Despite her cynical exterior, she still hopes for a world that will be free from discrimination and cruelty. When she's not spending her day commuting, she can be found watching funny videos, reading, and sending out needy vibes to strays around her.

14 thoughts on “Things To Know About ECS Service

    1. AvatarTeam BankBazaar

      Hi Bijoy,

      A utility code is the code used to identify your bank and branch. This is for all ECS payments.

      Cheers,
      Team BankBazaar

      Reply
  1. AvatarKhushboo Vaghela

    Hi,

    Please Guide – My Ecs date is 3rd of each month. And company used to deduct ECS on 2nd at 12.00 midnite & every time they told that ” AS PER RBI RULE, COMPANY NEEDS TO HIT ECS DAY BEFORE AT 12.00 MIDNITE AND CHARGE 600 PENALTY FROM US.

    Please Guide because every time we are paying penalty with let fee apx Rs. 600/- eventhough balance maintaining in bank account.

    Reply
    1. AvatarTeam BankBazaar

      Hi Khusboo, You will have to pay late fees only if there was a delay in your EMI. If the ECS is hitting your account on time and the amount is getting debited, a late fee shouldn’t be charged. Ask your bank why they are charging late fees in spite of you paying the amount before the due date. If you are maintaining sufficient balance in your account and the amount is getting debited on or before the due date, there is no question of late payment. Cheers, Team BankBazaar.

      Reply
  2. AvatarNidhi

    what is the time on which an ECS hits the bank account. For eg., if the ECS is due for 15th March , will it hit in the morning or evening

    Reply
    1. AvatarTeam BankBazaar

      Hi Nidhi, It depends. One can’t provide a specific time at which an ECS debit will happen on the due date. Cheers, Team BankBazaar

      Reply
  3. AvatarRANJITH

    My ECS due Date is 5th of every Month , it used to get deducted morning 8 AM 5th of every month , but this time i forgot to maintain the balance for 5th July 2018 , but i realised it only at 11AM and deposited the money in to my Bank Account,
    BUT THE MONEY IS NOT YET DEDUCTED, Will the ECS run Multiple Times for the Due Date.

    Reply
    1. AvatarTeam BankBazaar

      Hi Ranjith,

      This will depend on the bank. Since ECS is similar to standing instructions, please check with your bank about this.

      Cheers,
      Team BankBazaar

      Reply
  4. AvatarAnurag Katoch

    Hii

    Thanks for information. I am startup and starting a subscription base service to my client. Its only Rs. 99 per month. Please guide me procedure to enroll ECS service to collect payment

    Regards
    Anurag Katoch

    Reply
    1. AvatarTeam BankBazaar

      Hi Anurag Katoch,

      You will need to speak to your bank about setting up the ECS payment system to your account.

      Cheers,
      Team BankBazaar

      Reply
  5. AvatarM.Nagarjuna Reddy

    can an ECS cheque be presented —MID NIGHT?
    What is the Maximum charges
    will both banks charge
    Under which act —-section —RBI / NI / IPC penalty is charged
    If the due date is 2 nd of every month —-can they present in the mid night?
    What is the frequency of presentation

    Reply
    1. AvatarTeam BankBazaar

      Hi M.Nagarjuna Reddy,

      ECS is an electronic system and is automated. the time that it is presented depends on the bank. If you don’t maintain sufficient balance, penalty might be applicable. ECS comes under the purview of RBI.

      Cheers,
      Team BankBazaar

      Reply
  6. AvatarM.Nagarjuna Reddy

    What is the Maximum charges
    will both banks charge
    Under which act —-section —RBI / NI / IPC penalty is charged
    If the due date is 2 nd of every month —-can they present in the mid night?
    What is the frequency of presentation

    Reply
    1. AvatarTeam BankBazaar

      Hi M.Nagarjuna Reddy,

      ECS is an electronic system and is automated. the time that it is presented depends on the bank. If you don’t maintain sufficient balance, penalty might be applicable. ECS comes under the purview of RBI.

      Cheers,
      Team BankBazaar

      Reply

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