New NPCI Circular to improve the strike rate of NACH Debit Mandates

            The strike rate pf NACH Debit Mandates refers to the successful registration by the account holders bank.

            Destination Banks return physical NACH Debit Mandates due to a variety of reasons. The reasons can be varied as:

o   Drawer Signature Differs

o   Drawer signature required

o   Image not clear

o   Amount of EMI more than the limit allowed for the account

o   Mandate registration not allowed for CC Account

o   Date mismatch with image_account number

And so on, and so forth

            The reference circular for NACH Debit Return Reasons is NPCI NACH Cir No 16 dt.November  28, 2019.

            Vide the above circular, major changes in the Return process were introduced by NPCI.

            For the first time, NPCI introduced the concept of Penalties on destination banks for returning mandates with specific reason.

            The return reason is:

MO49 - Drawer Signature not updated in CBS

Rationale: It is the sole responsibility of the destination bank to upload drawer’s signatures in all the accounts of the bank. The sponsor bank or corporate is not at fault. The corporates should not be penalized for destination bank errors.

 The following table shows the trend of mandate registration for the last year

 

Break-up of the rejected mandates return-wise is not available in the public domain.            

NPCI on June 18,2021 released fresh operating guidelines to improve the success rate of NACH mandate registration.

The circular focusses on three return reasons

Return Reason 01) Signature Mismatch:

Where there is a marginal signature mismatch, NPCI has advised banks to implement the following in the process flow –

i)                    Review by a higher official

ii)                  Seeking confirmation from the customer through tele-calling and authentication.

This is applicable only to physical mandates, as there is no Wet Signature in case of digital mandates.

Return Reason 02) Mandates drawn on CC (Cash Credit /Overdraft) account:

o   There is a specific return reason i.e Mandate registration not allowed for (Cash Credit) CC Account.

To avoid rejection of the Mandates issued for genuine business purposes, destination banks are advised to focus on the purpose tag of the mandate. Based on the mandate purpose tag, banks may have a clear picture as to what mandates should be rejected for this reason.

Ideally, appropriate business rules can be built in the bank’s processing system, to flag mandates matching the pre-defined purpose tags.

This is applicable to both physical mandates as well as digital mandates.

 

Return Reason 03) Return on account of insufficient balance to recover processing fees: Almost all the banks charge their customers for NACH Debit Mandate registration in their accounts.

For eg: Quote

HDFC Bank – One-time Mandate Authorisation Charges per mandate (Physical / Online)            Rs. 100/- + GST (effective 1st July 2019)

 

State Bank of India – 32. National Automated Clearing House (NACH) Mandate (including ‘E’ mandate)

One-time Mandate Authorisation Charges per mandate ₹50/- + GST

Failed Mandate ₹250/- +GST

 

Punjab National Bank – Inward NACH Mandate Verification - Rs. 100/- per mandate on acceptance

Unquote

The above are just examples, the actual mandate registration charge may vary within the same bank, based on account variant.

Few banks are returning the NACH debit mandate if the balance in the account at the time of the mandate registration is not sufficient to recover the respective bank’s registration charges.

Now, NPCI has advised banks not to Reject mandates if there is insufficient balance to recover the registration charges. The logic is that registration of NACH debit mandate is a non-financial transaction and not a financial transaction.

  This is applicable to physical as well as digital mandates.

 

Disclaimer: I am solely responsible for any errors. The bottom line is ‘Mission #LessCashNotCashLess’. Nothing more – Nothing less

 

 

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