ECS: The smooth way to pay recurring bills

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Most of us  have some EMIs or investment getting deducted from our bank accounts. This happens on a regular basis and without fail. This is called the auto debit system. But how does it work and what are the benefits? Know all these here.

Behind the auto debit that happens from your account, is a feature known as an electronic clearing ssystem that is ECS. In simple terms, ECS is an easy way to digitally transfer money from one bank account to another. As per report from Credit Suisse, by 2023 digital payments in India can reach  about Rs 82 lakh crore.

Now let us look at benefits of ECS. In order to maintain your credit score it is important that you make all your payments on time. If you want you can make all your payments through  ECS. This system frees you from various kinds of hassles, like giving a cheque and remembering payment dates. Besides this, when you take a loan, then its EMI gets deducted every month through ECS. This prevents you from problems like keeping in mind when to transfer money, payment getting failed due to cheque bounce, levying penalties etc.

If you have to invest every month in a mutual fund through SIP, or you want to pay electricity/water and telephone bills then you can give a mandate to ECS for all this. Payment for loans and credit cards can also be done through ECS. As per the details given by the specific user, on the specified day RBI’s clearing house will take the amount from the user’s account and will put it in the account of the beneficiary. Then, that bank will put the amount in the beneficiary’s account. Talking about another benefit of ECS is the higher customer satisfaction. You can make quick bill payments through this, also it reduces the use of paper.

Now let us also look at the negative points. In recent times, there were a lot of issues in ECS regarding registrations, rejection ratio, claim settlement, etc. But the government is working to sort out all these issues. For example, another platform National Automated Clearing House (NACH) was brought, it is centralised and has web-based clearing system. It combines all the regional ECS systems to make a national payment system.