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    NACH (National Automated Clearing House)

    National Automated Clearing House (NACH) is a system developed by the National Payments Corporation of India (NPCI) for banks. This system can be used to make bulk transactions towards distribution of subsidies, dividends, salaries, pension, etc. Bulky interbank transactions which are repetitive and periodic in nature are facilitated by this National Automated Clearing House or NACH. The NACH system can also be used for collection of payments like the water bill, telephone bill, electricity bill, loans, insurance premium payments, investments, etc.

    What is the National Automated Clearing House (NACH) system?

    National Automated Clearing House or NACH is a centralized system which is implemented by the National Payments Corporation of India or NPCI for financial institutions, corporate and government as a web based solution for the facilitation of interbank, high volume electronic transactions. The NACH system was implemented with the aim of providing a single set of rules for operations of all electronic transactions that are common across all services. It was on 1st May 2016 that the NACH was introduced with an aim to consolidate the multiple Electronic Clearing Systems or ECS running across the country to provide an harmonization of standard and practices and eliminate the local barriers or inhibitors. Since then NACH has been used in place of the Electronic Clearing System (ECS). This meant that to give an automated debit instruction from your bank account you have to use the NACH function in place of the ECS function, which was previously being used.
    The National Automated Clearing House or NACH system is expected to provide national footprint and cover the entire core banking enabled banks across the whole country regardless of the location of the bank branch. This system supports Aadhaar based transactions which implies that it supports the financial inclusion measures initiated by the Government, Government Agencies and Banks. The National Automated Clearing House or NACH system encourages its member banks to create and manage their own products and looks into the needs of these banks and corporates including Mandate Management System (MMS) and an online Dispute Management System (DMS) coupled with strong information exchange and customised MIS capabilities. This system proves to be helpful to all its participants by providing a robust, secure and scalable platform with both transactions and file based transaction capabilities. With its best in class security features, cost efficiency and payment performance (STP) coupled with a multi-level data validation facility which is accessible to all participants across the country, the National Automated Clearing House or NACH system proves to be a safe and reliable system.

    What is National Automated Clearing House or NACH’s Aadhaar Payment Bridge System or APB system?

    NACH has a Aadhaar Payment Bridge System or APB which is again developed by the National Payments Corporation of India or NPCI and has been helping the Government and Government agencies in making the Direct Benefit transfer scheme successful. This Aadhaar Payment Bridge System or APB system uses the Aadhaar numbers of the intended beneficiaries for successfully channelising the Government subsidies and benefits to them. Through the Aadhaar Payment Bridge System or APB system, the Government departments and their sponsor banks are linked on one side whereas the beneficiary banks and beneficiary are linked on the other side.

    What is the National Automated Clearing House or NACH e-mandate service?

    The National Clearing House or NACH e-mandate service was launched by the National Payments Corporation of India or NPCI in an effort to cut the processing time and automate and streamline recurring payments. This is an electronic payment facility which is managed by the Reserve Bank of India or RBI that allows organisations and corporations to make bulk payments.

    All the corporations and organisations that are authorized under the Reserve Bank of India or RBI criteria can use the National Automated Clearing House or NACH credit system to make large payments to the personal bank accounts of several recipients. These payments can be in the form of corporate salaries, dividends, pensions, interest, and subsidies. All these payments are carried out using a single mechanism through the NACH system.

    Recurring payments can be easily authorized with the National Automated Clearing House or NACH e-mandate service by simply using one’s netbanking or debit card details.

    Benefits of NACH

    The National Automated Clearing House or NACH system makes it easier for those who make large transactions frequently. This system benefits the bank, its customers and also business organisations that engage in such transactions as frequently as on a monthly basis. The different benefits offered by the national automated house or NACH system are as follows:

    Benefits to the Banks:

    • Banks can offer a much better customer service by providing faster payment processing and creating stronger ties with the associated organisations.
    • Collection of EMI, loans, premiums and other payments becomes a lot easier and quicker with this system. This is because there is no longer a need to rely on the traditional checks or paperwork.
    • The workflow is much smoother and errors are limited as there are no manual processes involved.
    • All the transactions are much quicker and take very less time to complete as compared to before.

      Benefits to Large organisations

    • Large business organisations do not have to depend on cheques for clearance.

    • There is no need to keep track of due dates for payments manually as they are automatically registered.
    • Salaries, dividends, pension payments and other payments are made on time without any delay which makes the whole process a lot more efficient.
    • Larger payments like allowances and scholarships take less time to process.
    • Even the large business organisations and companies can offer a much improved customer service and faster bill payments.

      Benefits to the Customers

    • The customers also have no need to undertake any manual processes in these transactions.

    • The entire transaction process is a lot easier, efficient and faster than before.
    • The customers do not need to keep track of the due dates for payments like utility bills, credit card bills, interest payments, phone bills, electricity bills, and various other payments that are made on a repetitive and periodic basis. This is because all these are automatically handled through the registered banks.

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