You may have come across the automatic debiting system from your bank account in the case of recurring payments or bill payments. Have you ever tried to figure out the underlying system that has made life easier for you? Here, we bring the system to the foreground to let you know a few more details about the Electronic Clearing Service (ECS).
So, what is ECS?
ECS is an electronic mode of payment for transactions that are repetitive over regular intervals of time. Such transactions are processed under National Automated Clearing House (NACH), managed by National Payments Corporation of India (NACI). This method of payment is generally used for bulk transactions, such as dividend payment, interest, salary, tax collections, EMI payments, and insurance premium payments.
Types of ECS
There are two types of ECS:
- ECS Credit: Entities use ECS credit to afford credit to several beneficiaries, such as employees and investors. These beneficiaries are required to have accounts with banks within the jurisdiction of an ECS Centre. A single debit will be raised to the bank account of the user entity to complete the transaction. This facility is suitable for making payments, such as dividend distribution, interest, salary, and pension.
- ECS Debit: Entities use ECS debit facility for raising debits to several accounts, such as borrowers, consumers of utility services, and mutual fund investors. These accounts are required to be maintained within the jurisdiction of ECS Centre for single credit to the bank account of the user entity. The facility is generally used to make telephone/water/electricity bills, tax collection, EMI payments, and more.
Also Read: Corona Kavach/Rakshak or Health Insurance – Which is the Best For You?
What’s good about ECS?
By choosing to transact using ECS, you can avoid the necessity for issuing multiple cheques to get your job done. You don’t have to set up reminders, repent missing due dates for payment, and even avoid paying penalties for missing due dates. The payment method makes sure to complete the recurring payments on the specified date without you having to provide instructions manually.
You can set up an upper limit for such transactions to protect your account from excess debits. If your bill happens to go beyond the specified deadline, the bank will obtain your approval before clearing the bill.
Bonus—Low service charge!
The service charge applicable to ECS transactions. However, rest assured that the costs are lower than that of NEFT and other fund transfer services. RBI has also directed the destination banks to offer ECS credit for free to the beneficiary account holders.
If you hadn’t known ECS so far and thought that it could make your financial management more accessible, give it a try. The free-of-charge ECS credit service could simplify your work a lot more!
For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in
