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The National Automated Clearing House or NACH is a centralised electronic payment service for banks, corporates, financial institutions and the Government. It was set up by the National Payment Corporation of India (NPCI) to introduce best practices in electronic transactions. The NACH was an improvement over the Electronic Clearing System ECS that it replaced from May 2016.
NACH is capable of facilitating high volume electronic transactions (that may be periodic or repetitive) without any geographical barriers within the country. A single set of rules is applicable to all users, services providers and participants of NACH. Here is all you need to know about NACH.
The Mandate Management System or MMS is an integral part of NACH. It has the following features:
Distribution of salary, pension, interest or dividends to relevant stakeholders at a set frequency
Payments towards loans, insurance payments, recurring deposits or any other fixed payments.
The most important benefit of NACH has been to mutual fund investors. Registration on the NACH is a one-time process. It automatically links the bank account to the mandate using the mutual fund folio. SIP registration through NACH is also much easier. Unlike ECS that used to take 30 days to register an investor, NACH completes the process in less than half the time. If your bank is registered on the NACH, the one-time registration process takes place smoothly with much less paperwork.
NACH participants have to adhere to procedural guidelines under NPCI. An audit report has to be prepared and submitted to the NPCI, which is also shared with the Reserve Bank of India. The NPCI has also set up a Panel for Resolution and Disputes (PRD). The function of the PRD is to handle interbank settlement disputes. Arbitration cases referred to the PRD are processed and resolved for a prescribed fee.
The NACH has thus revamped the electronic processing of transaction and has facilitated efficient and speedy transactions for both users and service providers.
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