NACH stands for National Automated Clearing House.
It was formed by the NPCI (National Payments Corporation of India). Both NACH and NPCI are regulated by the RBI ( Reserve bank of India).
NACH took place of ECS (electronic clearing service) on May 1, 2016.
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What is NACH?
It is a centralized payment solution. It is a payment solution for bulk payments. It provides interbank, high-volume, electronic transactions that are repeated and periodic in nature.
It gives the facility of automated and systematic funds transfer between bank accounts.
It is a simple and efficient Auto debit system for bulk and periodic transactions that provides services to all major sectors in the country like banks, corporates, government, organizations, etc., and even a person.
How does NACH work?
NACH mandate of the customer is collected by the company and then it is verified by the customer bank and NPCI. Once the mandate is verified this gives the right to the company to automatically debit the payment from the customer account periodically.
NACH provides 2 types of services
NACH Credit helps companies and the government to make bulk payments in different bank accounts from their bank account.
Salaries credited by companies and corporations to the employee’s account from their account are done via this facility. Another example is Dividend payment to lakhs of shareholders by listed companies is done through this.
Banks and NBFC are receiving their bulk payments from customers with the help of this facility.
Like receiving payments of loan EMI, policies, card bills, SIP, etc.
What are the Major uses of NACH?
It is used for collecting and making bulk transactions, some common and frequent uses you need to know of this facility are as below-
- SIP
- Bill payments
- Dividend
- Salary distribution
- Credit card bill
- Loan EMI
- Salary
- Pension
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