NACH Full Form: Know the Complete Details

NACH is a web-based platform to facilitate interbank, high volume, electronic transactions for Banks, Financial Institutions, Corporates and Government. It is a centralised clearing service that provides interbank high volume, low value transactions that are repetitive and periodic in nature.

What is the full form of NACH?

National Automated Clearing House.

Origin

• NACH came into existence in May 2016.
• It replaced Electronic Clearing System (ECS).
• It has been introduced by National Payments Corporation of India (NPCI).

Wings of NACH

National Automated Clearing House (NACH) has two wings:

1. NACH Credit:
   • NACH credit system has dedicated online dispute management system, which totally safe as well as secure for online access.
   • It is totally capable of performing ten million transactions every single day.
   • It facilitates the users to download and upload documents with a lot of ease and that too in real-time.
   • It is closed on every Sunday and such other holidays.
   • It help organizations in easily tracking their payments.

2. NACH Debit
   • NACH debit system also has a dedicated online dispute management system, that ensures the security of the user’s single confidential data.
   • It has a unique mandate reference number that allows the users to easily track more than one payment.
   • It ensures safe as well as secure transactions between an organization and its parties.

Membership

Members of NACH system has been categorized in three entities:

1. Sponsor banks: They are allowed to originate transactions that the system requires. They have a mutual agreement with NPCI and are members of any payment system approved by Reserve Bank of India (RBI).
2. Destination banks: They are allowed to do transaction, process mandates and update the Aadhar mapper through the use of the system. On certain agreement, all the banks that are members of any payment system can participate on NACH system as Destination Banks.
3. Corporate/government departments: On submission of necessary agreement with their Sponsor Banks, corporate or government departments can participate on NACH system as Users. For this, the departments indicate the names of the Sponsor Banks with whom accounts are maintained to facilitate settlement on their behalf.

Application of NACH

• NACH offers credit and debit service to corporates, banks, and financial institutions, the service
• It integrates all regional ECS into one National Payment System
• It is better than its predecessor, Electronic Clearing Service
• It can be used for making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension
• It can also be used for bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium etc.

Quick Facts About NACH

• System of NACH provides a technology platform to banks to route the debit / credit instructions through NPCI using IFSC Code / MICR Code / IIN Code or any other code as may be decided from time-to-time.
• All applicants to NACH system will have to pay a membership fee and any other fee as may be decided by NPCI from time-to-time.
• Indian Postal Department is also a NACH member.
• National Automated Clearing House (NACH) payment system are available on all days of the week from 1 August.

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