Before reading further, quickly recall all the payments you have to make this month.
Are you sure?
Not missing anything?
Oh gosh! There’re so many. It’s almost impossible to remember and take care of all the payments and transfers.
But, now the things have changed a bit. In India, payment systems have evolved over time. NACH is one such scheme run by the National Payments Corporation of India to assist financial institutions, banks, corporations, and the government.
NACH is an abbreviation for National Automated Clearing House. It allows for quick and automated money transfers between banks and their branches across the nation. The transactions are carried out on the same day that they are initiated.
Electronic transfers, large-amount transactions, and regular monthly payments are all handled using NACH. Dividends, wages, incentives, pensions, utility payments, electricity charges, loan EMIs, and insurance premiums are all paid using it.
Yes, you read it right. Everything.
Let us understand its benefits in detail.
What are the benefits of NACH?
Since there is no need to clear cheques, it streamlines the procedure for banks and saves time. Fast payment acceptance fosters closer relationships with customers and simple banking services reduce the risk of theft and fraud and lessen the chance of late payments.
For customers like you, it helps in quickly handling regular payments and eliminates the need to remember the payment dates. It is a convenient process because cancellations are simple and all transactions are paid in a single day. Utilizing only online banking credentials, it is an overall safe and secure process.
Now that you understand the advantages of NACH, let’s hop onto its registering procedure.
How is the registration for NACH done?
NACH registration is a simple procedure. The steps are as follows:
- The first step in signing up for NACH is completing the OTM (One Time Mandate) form.
- The form is then submitted for registration and verification through the website.
- After that, the NACH sends the paperwork to the customer's bank for processing.
- The customer will get a message from the bank verifying their registration.
- The confirmation authorizes the institution to deduct the payment from the customer's account automatically.
- The entire procedure takes about 10-15 days.
How is NACH useful for loan repayment?
After borrowing money from a formal financial institution, a borrower must repay it in equal instalments, i.e. EMIs on a regular basis. So, if the payment is due on a recurring basis, the individual must deposit the funds into the lender's account.
There is a possibility that the client may forget to make payments on the set deadline or will disregard the reminder message. NACH mandate is a new mechanism that simplifies loan repayment by securely transferring the money from the customer's account into the lender's account.
What role does NACH play in SIP payments?
NACH is required for investors who invest in mutual funds. Mutual funds are now exclusively registered utilizing the NACH mandate. NACH allows an investor to sign up for mutual fund systematic investment schemes.
Following registration, a predetermined sum is deducted from the investor's account on a regular basis. Each folio required a unique mandate. A mandate is only valid for one folio. On NACH, several mandates can be created.
The RBI oversees the NACH system, making it a centralized entity for tracking and supervising all transactional activity. The NACH Mandate has become a crucial aspect of the various processes including personal loan since it aids in timely payment of EMIs and other recurring payments.