Electronic Clearing Service(ECS) - FAQs
Q.1. What is Electronic Clearing Service (ECS)?
Ans It is a mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc or for loan installments of financial institutions/banks or regular investments of persons.
Q.2. What are the types of ECS? In what way they are different from each other?
Ans There are two types of ECS called ECS (Credit) and ECS (Debit).
ECS (Credit) is used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment.
ECS (Debit) is used for raising debits to a number of accounts of consumers/ account holders for crediting a particular institution.
Working of ECS Debit System
Q.3. What is ECS (Debit) scheme?
Ans It is a scheme under which an account holder with a bank can authorise an ECS user to recover an amount at a prescribed frequency by raising a debit in his account. The ECS user has to collect an authorisation which is called ECS mandate for raising such debits. These mandates have to be endorsed by the bank branch maintaining the account.
Q.4. How does the scheme work?
Ans Any ECS user desirous of participating in the scheme has to register with an approved clearing house. The list of approved clearing houses is available at RBI web-site www.rbi.org.in. He should also collect the mandate forms from the participating destination account holders, with bank's acknowledgement. A copy of the mandate should be available with the drawee bank.
The ECS user has to submit the data in specified form through the sponsor bank to the clearing house. The clearing house would pass on the debit to the destination account holder through the clearing system and credit the sponsor bank's account for onward crediting the ECS user. All the unprocessed debits have to be returned to the sponsor bank within the time frame specified. Banks will treat the electronic instructions received through the clearing system on par with the physical cheques.
Q.5. What are the advantages to the ultimate beneficiary?
· Trouble free- Eliminates the need to go to the collection centres/banks by the customers and no need to stand in long ‘Q’s for payment
· Peace of mind- Customers also need not track down payments by last dates.
· The debits would be monitored by the ECS users.
Q.6. How does the scheme benefit the ECS user-like corporate bodies/ institutions?
Ans
· The ECS user saves on administrative machinery for collecting the cheques, monitoring their realisation and reconciliation
· Better cash management.
· Avoids chances of frauds due to fraudulent access to the paper instruments and encashment.
· realise the payments on a single date instead of fractured receipt of payments.
Q.7. What are the advantages to the banks?
Ans
· Banks handling ECS get freed of paper handling.
· Paper handling also creates lot of pressure on banks as they have to encode the instruments, present them in clearing, monitor their return and follow up with the concerned bank and customers.
· In ECS banks simply get the mandate particulars relating to their customers. All they need to do is to match the account particulars like name, a/c number and debit the accounts.
· Wherever the details do not match, they have to return it back, as per the procedure.
Q.8. Can the mandate given once be withdrawn or stopped?
Ans Yes. The mandate given is on par with a cheque issued by a customer. The only stipulation under the scheme is that the customer has to give prior notice to the ECS user, to ensure that they do not include the debits.
Q.9. Can the customer stipulate any maximum debit, purpose or validity period for the mandate?
Ans Yes. It is left to the choice of the individual customer and the ECS user to finalise these aspects. The mandate can contain a maximum ceiling; it can also specify the purpose as also a validity period.
Q.10. What is the current coverage of the scheme?
Ans At present the scheme is in operation at 15 RBI centres (ie centres where RBI manages the Clearing House operations) and at other centres where Public Sector Banks manage the clearing operations. The list of centres is available at the RBI web-site under the procedural guidelines.
Q.11. Processing charges on individual transactions
Ans RBI has deregulated the service charges that could be levied by sponsor banks. RBI has waived the processing charges levied by RBI and other banks managing the clearing houses till March 2009.
Q.12. Which are the institutions eligible to participate in the ECS Debit scheme?
Ans Utility service providers such as telephone companies, electricity supplying companies, electricity boards, credit card collections, collection of loan installments by banks and financial institutions, and investment schemes of Mutual funds, etc.
Source: http://rbidocs.rbi.org.in/rdocs/ECS/DOCs/19631.doc
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