The Electronic Clearing Service (ECS) is a retail payment system that can be used to make bulk payments or receipts. Its aim is to decrease volumes of paper instruments in MICR clearing and improve customer service by ensuring prompt and secure interest/dividend payments to the beneficiaries. Coupled with a system that is cost-effective, and serves as an alternate method of effecting bulk, low value, recurring payment transactions, ECS is the answer.
Do you grit your teeth at the beginning of every month, because of the amount of time and effort that goes in to making monthly payments? Keeping track of bills, and running from the electricity board, to the water department, to your monthly credit card payment, to EMIs on your car, month on month, every month, is just no joke.
There is a way now, however, to make your payments on time, every time.
The Electronic Clearing Service (ECS) is a retail payment system that can be used to make bulk payments or receipts. Its aim is to decrease volumes of paper instruments in MICR clearing and improve customer service by ensuring prompt and secure interest/dividend payments to the beneficiaries. Coupled with a system that is cost-effective, and serves as an alternate method of effecting bulk, low value, recurring payment transactions, ECS is the answer.
This facility is useful to companies and government departments to make/receive large volumes of payments rather than for funds transfers by individuals. ECS (Credit) can facilitate bulk payments to individuals/vendors and ECS (Debit) can receive bulk utility payments from individuals.
Companies make use of ECS (Credit) to make periodic dividend/ interest payments to their investors. Employers like banks and government departments make monthly salary payments to their employees through ECS (Credit). Payments of repetitive nature to be made to vendors can also be made through this mode.
ECS (Debit) is mostly used by utility services like telephone and electricity companies, to receive the bill payments directly from customer bank accounts.
The advantages of ECS, both to banks and consumers, are many, including savings on administrative costs, printing, dispatch and reconciliation. There is no room for losing the instrument of payment in the post. The chances of fraud are reduced, since there is no access to paper instruments, like cheques. Payments are automatically made on time, at the designated date, reducing dependency on the human element. For banks, there’s that much less paperwork. They no longer need to encode the instruments, present them in clearing, monitor their return and follow up with the customer. There is also no value limit on the number of individual transactions allowed.
ECS (Debit Clearing) is a convenient, safe and economical way of collecting regular periodic payments from a large number of consumers, the process for which takes between 5 to 10 working days. Once you schedule payment through the bank, it has to be credited to your service provider. The bill amount is then debited from your bank account and transferred to your service provider via the ECS service provided by the Reserve Bank Of India (RBI).
Individuals are not charged for the ECS facility, but institutions are.
ECS Charges for Credit Clearing
| Number of Entries |
Revised Rates |
| Up to 10,000 entries |
Rs. 3 per entry + RBI or Destination Bank Charges if any. |
| Above 10,000 up to 1 lac entries |
Rs. 2 per entry + RBI or Destination Bank Charges if any. Minimum Rs. 30,000 |
| Above 1 lac entries |
Re. 1 per entry + RBI or Destination Bank Charges if any. Minimum Rs. 2,00,000 |
|
ECS Charges for Sponsor Bank, Destination Bank and/or RBI
| ECS Charges |
Revised Rates |
| Sponsor Bank |
RBI or Destination Bank Charges if any, Minimum Rs. 2750 |
Charges payable to
Destination Bank and/or RBI |
On actual basis, i.e. as waived/by the guidelines of RBI |
|
ECS Charges for Debit Clearing
| Name of the Items |
Revised Rates |
| Debit Clearing |
Re. 1 per transaction + RBI or Destination Bank Charges if any, Minimum Rs. 2,750 |
| Returning Charges on account of insufficient funds |
Rs. 40 per entry |
| Full waiver in respect of Income Tax Refund Orders |
Nil |
Some Drawbacks…
There are, however, some concerns about ECS, which have to do with the sheer volume of traffic that these systems now have to handle. There is also the question of protecting the rights of the users of these payment systems, enhancing efficiency and competition, and ensuring a safe, secure and sound payments system. There is also the risk that participants are unable to meet their full financial obligations as expected. All electronic systems have to factor in operational risks such as system downtime or operational errors.
…But The Advantages Are Many…
The ECS mode is the way forward, as opposed to traditional cheque-centric processing systems , which are comparatively inflexible, expensive and increasingly difficult to maintain. Moreover, billions of pounds of greenhouse gas emissions can be saved each year if utilities deposited payments electronically. With ECS, there is improved fraud detection, reduction in expenses on a per item basis, removal of geographical boundaries to depository relationships, no dual workflows for paper and electronic deposits, lower transportation and courier costs, and reduced clearing costs.
Source: Bank Bazaar |
