Q.1. What is Electronic Clearing Service (ECS)?
Ans It
is a mode of electronic funds transfer from one bank account to another bank
account using the services of a Clearing House. This is normally for bulk
transfers from one account to many accounts or vice-versa. This can be used
both for making payments like distribution of dividend, interest, salary,
pension, etc. by institutions or for collection of amounts for purposes such as
payments to utility companies like telephone, electricity, or charges such as
house tax, water tax, etc or for loan installments of financial institutions/banks
or regular investments of persons.
Q.2. What are the
types of ECS? In what way they are different from each other?
Ans There
are two types of ECS called ECS (Credit) and ECS (Debit).
ECS (Credit) is used for affording credit to a large number
of beneficiaries by raising a single debit to an account, such as dividend,
interest or salary payment.
ECS (Debit) is used for raising debits to a number of
accounts of consumers/ account holders for crediting a particular institution.
ECS Credit
System
Q.3.
Who can initiate an ECS (Credit)
transaction?
Ans ECS
payments can be initiated by any institution (called ECS user) who have to make
bulk or repetitive payments to a number of beneficiaries. They can initiate the
transactions after registering themselves with an approved clearing house. ECS
users have also to obtain the consent as also the account particulars of the
beneficiary for participating the ECS clearings.
The ECS user's bank is called as the sponsor bank under the
scheme and the ECS beneficiary account holder is called the destination account
holder. The destination account holder's bank or the beneficiary's bank is
called the destination bank.
The beneficiaries of the regular or repetitive payments can
also request the paying institution to make use of the ECS (Credit) mechanism
for effecting payment.
Q.4. How does the ECS Credit system work?
Ans
The ECS users intending to effect payments have to submit the data in a
specified format to one of the approved clearing houses. The list of the
approved clearing houses or the list of centres where the ECS facility has been
provided is available at www.rbi.org.in.
The clearing house would debit the account of the ECS user
through the account of the sponsor bank on the appointed day and credit the
accounts of the recipient banks, for affording onward credit to the accounts of
the ultimate beneficiaries.
Q.5.
At which of the centres ECS facility
is available?
Ans At
present ECS facility is available at more than 60 centres and the full list is
available at the web-site of RBI.
The beneficiaries need to maintain an account with one of
the banks at these centres in order to avail of the benefit of ECS.
Q.6. How does a beneficiary participate in ECS (Credit ) scheme?
Ans The
beneficiary has to furnish a mandate giving his consent to avail of the ECS
facility. He should also communicate to the ECS user the details of his bank
branch and account particulars. Such authorisation form is called a mandate.
Q.7. Will there be any need for the beneficiary
to alter this mandate?
Ans Yes.
In case the information / account particulars undergo change, then he has to
notify the ECS user to carryout changes in order to ensure continued benefits
from the ECS user. In case the account particulars at the destination branch do
not match, the destination branches would return the credit through their
service branch to the clearing house.
Q.8.
Who will communicate the
beneficiaries' about the credit?
Ans It
is the responsibility of the ECS user to communicate to the beneficiary the
details of credit that is being afforded to his account, indicating the
proposed date of credit, amount and the relative particulars of the payment, so
that the beneficiary can match the same with the details furnished by the bank
in the account statement / passbook.
Q.9. What are the advantages to the ultimate
beneficiary?
Ans
·
The ultimate beneficiary need not make frequent
visits to his bank for depositing the physical paper instruments.
·
He need not apprehend loss of instrument and
fraudulent encashment.
·
The delay in realisation of proceeds after receipt
of paper instrument is obviated.
Q.10. How does the scheme benefit the ECS user-like
corporate bodies/ institutions?
Ans
·
The ECS user saves on administrative machinery for
printing, dispatch and reconciliation.
·
Avoids chances of loss of instruments in postal
transit.
·
Avoids chances of frauds due to fraudulent access
to the paper instruments and encashment.
·
Ability to make payment and ensure that the
beneficiaries' account gets credited on a designated date.
Q.11. What are the advantages to the banks?
Ans
·
Banks handling ECS get freed of paper handling.
·
Paper handling also creates lot of pressure on
banks as they have to encode the instruments, present them in clearing, monitor
their return and follow up with the concerned bank and customers.
·
In ECS banks simply get the payment particulars
relating to their customers. All they need to do is to match the account
particulars like name, a/c number and credit the proceeds.
·
Wherever the details do not match, they have to
return it back, as per the procedure.
Q.12.
How can the customer track-down these
payments?
Ans Banks
have been advised to ensure that the pass-books / statements given to the
customers reflect the particulars of the transaction provided by the ECS users.
Customers can match these entries with the advice received by them from the
payment institution.
Q.13.
Is there any limit on the amount of
Individual transactions?
Ans No
value limit on the amount of individual transactions has been prescribed under
the scheme.
Q.14. What are the Processing / Service charges? Is
it a costly service?
Ans RBI
has since deregulated Service Charges to be levied by sponsor banks. As regards
Processing Charges levied by RBI and other banks managing the clearing houses,
the same has been waived till March 31, 2008.
Q.15. Is it necessary for the corporates / institutions to collect
mandate from the investors?
Ans Yes.
A model mandate form has been prescribed for the purpose. Payment processing by
banks becomes easier once the database is prepared. SEBI has also issued
guidelines to investors to furnish their account numbers in their share
applications for printing the same on the interest / dividend warrants,
collecting the account particulars and mandates may not pose much problem.
ECS
Debit system
Q.16. What is ECS (Debit) scheme?
Ans It
is a scheme under which an account holder with a bank can authorise an ECS user
to recover an amount at a prescribed frequency by raising a debit in his
account. The ECS user has to collect an authorisation which is called ECS
mandate for raising such debits. These mandates have to be endorsed by the bank
branch maintaining the account.
Q.17. How does the scheme work?
Ans Any
ECS user desirous of participating in the scheme has to register with an
approved clearing house. The list of approved clearing houses is available at
RBI web-site www.rbi.org.in.
He should also collect the mandate forms from the participating
destination account holders, with bank's acknowledgement. A copy of the mandate
should be available with the drawee bank.
The ECS user has to submit the data in specified form
through the sponsor bank to the clearing house. The clearing house would pass
on the debit to the destination account holder through the clearing system and
credit the sponsor bank's account for onward crediting the ECS user. All the
unprocessed debits have to be returned to the sponsor bank within the time
frame specified. Banks will treat the electronic instructions received through
the clearing system on par with the physical cheques.
Q.18. What are the advantages to the ultimate
beneficiary?
Ans
·
Trouble free- eliminates the need to go to the
collection centres / banks by the customers and no need to stand in long ‘Q’s
for payment
·
Peace of mind- Customers also need not track down
payments by last dates.
·
The debits would be monitored by the ECS users.
Q.19. How does the scheme benefit the ECS user-like corporate bodies/
institutions?
Ans
·
The ECS user saves on administrative machinery for
collecting the cheques, monitoring their realisation and reconciliation
·
Better cash management.
·
Avoids chances of frauds due to fraudulent access
to the paper instruments and encashment.
·
Realise the payments on a single date instead of
fractured receipt of payments.
Q.20. What are the advantages to the banks?
Ans
·
Banks handling ECS get freed of paper handling.
·
Paper handling also creates lot of pressure on
banks as they have to encode the instruments, present them in clearing, monitor
their return and follow up with the concerned bank and customers.
·
In ECS banks simply get the mandate particulars
relating to their customers. All they need to do is to match the account
particulars like name, a/c number and debit the accounts.
·
Wherever the details do not match, they have to
return it back, as per the procedure.
Q.21. Can the mandate given once be withdrawn or
stopped?
Ans Yes.
The mandate given is on par with a cheque issued by a customer. The only
stipulation under the scheme is that the customer has to give prior notice to
the ECS user, to ensure that they do not include the debits.
Q.22. Can the
customer stipulate any maximum debit, purpose or validity period for the
mandate?
Ans Yes.
It is left to the choice of the individual customer and the ECS user to
finalise these aspects. The mandate can contain a maximum ceiling; it can also
specify the purpose as also a validity period.
Q.23. What is the current coverage of the scheme?
Ans At
present the scheme is in operation at 15 RBI centres (i.e. centres where RBI
manages the Clearing House operations) and at other centres where Public Sector
Banks manage the clearing operations. The list of centres is available at the
RBI web-site under the procedural guidelines.
Q.24.
Processing charges on individual
transactions
Ans RBI
has deregulated the service charges that could be levied by sponsor banks. RBI
has waived the processing charges levied by RBI and other banks managing the
clearing houses till March 2008.
Q.25. Which are the
institutions eligible to participate in the ECS Debit scheme?
Ans Utility service providers such as telephone
companies, electricity supplying companies, electricity boards, credit card
collections, collection of loan installments by banks and financial
institutions, and investment schemes of Mutual funds, etc.Source:-www.iba.org.in/faqs-rtgs-neft-ecs.doc