What is ECS and which banks offer the service?
ECS is a mode of electronic fund transfer from one bank account to another using the services of a clearing house. It is normally used for bulk or repetitive transfers. While ECS (credit) is used by institutions for distributing dividend, salary or pension, ECS (debit) is used by individuals to make regular payments to utility or insurance firms, or to repay bank loans via EMIs.
The facility is available at over 60 centres managed by the Reserve Bank of India and other public sector banks like the State Bank of India and Bank of Baroda. The beneficiaries need to maintain an account with one of the banks at these centres to avail of the benefit of ECS. The complete list of centres can be viewed at www.rbi.org.in/scripts/ECSUser.aspx.
What are the charges?
The ECS is a free service. RBI has done away with the service charges that can be levied by the sponsor banks. Also, processing charges, which can be levied by RBI and the banks managing the clearing houses, have been waived off till 31 March 2009. However, a penalty— Rs 75-500, depending on the bank—is imposed if your account has insufficient funds and the amount cannot be withdrawn.
How does ECS (debit) work?
To authorise direct debit from a bank account, first the customer has to collect an ECS mandate form and have it endorsed by the branch maintaining the account. The mandate has details like name, account number and bank’s name. Based on this information, the firm accepting the ECS payments prepares transaction data and submits it to the clearing house through its sponsor bank. After validating the data, the clearing house processes it, debits the amount from the given bank account and credits it instantly to the destination account.
The process is simple but there can be operational problems like getting the mandate. On paper, the mandate form is to be given by the institution accepting the payments, but several banks claim that the bank where the user has an account should issue it. Worse, these forms are not available on the banks’ Websites and some refuse to accept the template downloaded from the RBI Website. So if your bank does not issue the mandate, you will have to rely on the conventional cheques.
Can the endorsed mandate be stopped or withdrawn?
Yes. The mandate works like a cheque, but instead of issuing multiple cheques, you just need to give a one-time instruction. The customer needs to give prior notice to the company/bank to ensure it doesn’t include debits.
Published on: Dec 25, 2008, 11:45 AM IST
Posted by: AtMigration, Dec 25, 2008, 11:45 AM IST