Electronic Clearing Service or ECS is a method of transferring funds electronically and is generally used for bulk transfers. This method is used for funds which are both repetitive and periodic in nature.
This method of fund transfer is usually used by large organisations or institutions for bulky transfers like salaries, fees, pensions, interests, dividends, loan installments, etc. Electronic Clearing Service or ECS method can also be used for paying bills and clearing dues.
In simple language, this method means transferring money from one bank account to many other bank accounts or from multiple bank accounts to one bank account. The Electronic Clearing Service also handles transactions which are processed under the NACH or National Automated Clearing House which is operated by National Payments Corporation of India (NPCI).
What is Electronic Clearing Service or ECS?
The full form of ECS is Electronic Clearing Service. ECS is an electronic mode scheme that transfers funds from one bank account to another, allowing for electronic credit or debit transactions linked to the account of the client. It’s usually used for periodic or regular or transactions in nature.
ECS is a system that lets banks automatically deduct payments from your account with your permission. A customer must fill out the ECS mandate form that acts as the instruction and proof for banks to make payments. ECS can be used for multiple types of financial transactions.
Types of ECS (Electronic Clearing System)
There are two different types of ECS.
- ECS Credit- Business organisations that make bulk payments to multiple people use ECS Credit. For instance, salary payments and bank interest are credited monthly using ECS Credit.
- ECS Debit- ECS Debit can be set for making payments like utility bills, insurance instalments, and telephone bills. Fill an ECS mandate with your bank to automate any repetitive payments.
Benefits of ECS
- ECS increases customer relationships
- ECS reduces paper use
- ECS does not inflict delayed payments costs
- It appears to help in the quick payment of bills
- ECS enhances the payment of essential utility bills for customers, such as electric bills, phone bills, internet bills, etc.
- It also enables the payment of insurance premiums, loan instalments, credit card payments, mutual funds etc.
How do you make use of an ECS scheme?
- Individuals required to notify your bank and offer an approving mandate to the organization, which can then credit or debit the transactions via the bank.
- The Mandate includes branch information and account details.
- It is the institution ‘s responsibility to provide information about the amount to be debited or credited to this account, implying the credit date and other relative details of the transaction.
- Individuals will be informed through mobile alerts or messages that the money has been deducted from their account.
- The ECS consumer can set the maximum amount deductible from the bank, define the debit reason, and set a validity period for each provided mandate.
FAQs
What is an example of an Electronic Clearing Service (ECS)?
With ECS, you need not make recurring payments manually. It is a system set to automate recurring financial transactions like instalments paid towards loan or systemic investment plans.
Who can initiate an ECS (Credit) transaction?
An institutional user registered with an ECS centre can initiate an ECS Credit transaction. An institutional user is any institute processes bulk payments to various beneficiaries.
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