All You Need to Know About NACH (National Automated Clearing House)

The National Payment Corporation of India (NPCI), which is the prime organization for all retail payments in India, launched the National Automated Clearing House (NACH) to offer a simple and efficient system for payment processing across all sectors in the country including banks, corporates, and government organizations. In other words, it’s an electronic payment clearance system for the majority of transactions in India.

How does NACH work?

• A corporate collects a NACH mandate form from its customers. This document authorizes the company to automatically debit their accounts on a recurring basis as required.
• It verifies the details provided by the customers in the mandate form, after which it submits it to the bank.
• The bank transfers the form to the NPCI which then forwards it to the customer’s bank.
• Once the customer’s bank approves the mandate, the corporate becomes authorized to debit the payments from the customer’s account.

NACH, NACH Credit, and NACH Debit

NACH is a web-based payment solution for bulk payments. It helps banks, NBFCs, corporations, and government offices to make interbank transactions with ease.

NACH Credit allows corporates and organizations to make bulk payments in a number of bank accounts directly from their own bank accounts. Government social welfare scheme subsidies, savings account interest, etc. are commonly credited to customers’ accounts through NACH Credit.

Just like NACH Credit, NACH Debit allows the banks and NBFC to receive bulk payments from the customers without interference from third-parties or unnecessary verifications, etc.

Both NACH Credit and NACH Debit offer a number of features such as online dispute management, a mandate reference number for payments tracking secure payments, etc.

NACH was designed to overcome the shortcomings of ECS (Electronic Clearing Service) which was the primary payment system earlier. These problems included long settlement periods (3-4 days), lack of dispute management system and unique reference number of payments tracking, etc.

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