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What is National Automated Clearing House



NACH is the centralised web-based payment solution that helps the banks, corporate sectors, government and other financial institutions to handle bulk payments. High volume transactions such as dividend and salary pay by the corporate, subsidies and pensions payment by the government and such can be easily done through NACH. The system will also assist the financial institutions and corporate to receive high volume payments as well. High volume payments that consist of water, electricity, telephone bills, loan amounts, EMIs, mutual fund investments payments can be received through NACH solution.
NACH was launched by the National Payment Corporation of India (NPCI). The solution will facilitate all kind of interbank, electronic transfers for bulk volume payments in easy ways. Through NACH the any payment can be made through ECS irrespective of the geographical location of the banks across the nation.


Objectives of NACH-

The NACH system is based on Core-Banking Solution (CBS) of the participating banks for centralized posting of internal debit / credit transactions and NPCI would run the Centralized administration from Chennai or as might be chosen from time to time, with settlement in the books of Reserve Bank of India (RBI). The NACH system provides end-to-end processing of mass electronic payment instructions with the following objectives:

  • To create a national eco-framework covering all banks throughout the country for handling and processing electronic payment requests.
  • To provide a technical platform for the banks to route the credit/debit instructions through NPCI by making use of different routing codes such as IIN Code, IFSC Code and MICR Code.
  • To provide Direct Corporate Access (DCA) to few chosen Corporates/Government Depts, and other significant client foundations to NPCI NACH framework.
  • To provide a sound system for settlement, special cases taking care of, preparing of profits, rejects, inversions, discounts, denials, management of holidays, dispute handling and many more.
  • To maintain a robust mapper of Aadhaar number to Institution Identification Number (IIN) with related governance mechanism.
  • To create a strong Mandate Management System (MMS) and related governance mechanism.
See the related post : General Provident Fund (GPF)
Features of NACH-
  • Incorrect details such as your bank account number, folio number, etc. can result in your NACH getting rejected.
  • NACH can also be rejected if the investor’s bank is not a part of NACH.
  • You just have to submit the cancellation form to stop NACH any time.
  • There is no limit on how many NACH mandates you can register.
Benefits of NACH –

For consumers-

  • Faster process and easier than earlier processes.
  • No need to remember the due dates for payments like electricity bills, phone and credit card bills, interest payment and so many payments on time through automatic transfer via registered banks.

For an Organisation-

  • No dependency on cheques and clearance.
  • Less time to process payments like scholarships, allowances, subsidies and such.
  • On time salary, dividends and pension payments.

For Banks-

  • Better customer service, smooth processing of payments, better connection with affiliated organisations.
  • No dependency on cheques and paperwork. Hassle free method of registration, payment and collection of EMI, Loans and advances.
  • No manual process is related so less error and faster workflow, smoother than earlier.


Step-by-step process of how NACH works-
  • The corporate (or money-collecting agency) collects the NACH mandate form from customers. With the mandate form, the customer gives the corporate the authority to debit his account for a certain period and at a certain frequency.
  • The corporate verifies the details provided by the customer in the mandate form.
  • After verification of details, the corporate forwards the NACH mandate to its bank.
  • The corporate’s bank then shares the NACH mandate with the NPCI.
  • Once the information is validated, the NPCI forwards the mandate to the customer’s bank for approval. Only fully validated transactions are forwarded to the customer’s bank for debiting.
  • Once approved by the customer’s bank, the corporate is authorised to collect funds from the customer’s account.



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