Difference Between NACH And ECS For Fund Transfer

Till now Electronic Clearing Service (ECS) was the most preferred platform for regular and periodic fund transfer. National Payments Corporation of India has come up with a new generation and even better platform called the National Automated Clearing House (NACH) which can give tough competition to the existing platforms.

Let us understand the main difference between the ECS and NACH and which is better platform for fund transfer.

1) As of now, Electronic Clearing Service and (ECS) in India is available at around 89 centers in the country. While it is operated by the RBI at 15 centers, it is operated by commercial banks at the remaining centers.

The NACH will be robust, secure and will have both transaction and file based transaction processing capabilities. NACH platform will have around 82000 plus bank branches across India.

2) There is no standardized operating model, and ECS platform uses manual processes and has other inherent challenges such as inconsistent timelines around post transactional query management and servicing.

NACH platform is expected to consolidate the current multiple ECS systems and provide a framework for removal of the local barriers.

3) In ECS, presentation and settlement is spread over 3-4 day period.

NACH will have same day presentation and settlement, including returns processing.

4) During any discretion the management of dispute us left to the Destination Bank and Sponsor Bank .

There is a well defined Dispute Management System; electronic platform to raise and resolve issues.

5) A robust Mandate Management System, which includes standardized mandate format and a defined workflow for mandate verification.

Mandate verification is done based on physicals, resulting in verification issues and delayed timelines.

NACH	ECS
A robust Mandate Management System	Mandate verification is done based on physicals
Unique mandate registration reference number	No such concept of a unique mandate registration reference number
Lower number of rejects	Higher number of rejects observed on account of mandate related issues
Same day presentation and settlement, including returns processing	Presentation and settlement is spread over 3-4 day period
Well defined Dispute Management System;	Dispute management is left to the discretion of the Destination Bank and Sponsor Bank

Conclusion

National Automated Clearing House (NACH), a web based solution for Banks, can be used to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature. This seems to be a much better fund transfer mechanism at the moment.