Dejargoned: Bulk and recurring payments in banking
All of us have made and received payments to and from our bank accounts: be it receiving salary at the end of the month, or paying the utility bills. The salary sent by your employer to you and your colleagues is a bulk payment and your utility bill payments that go out of your account every month are recurring payments.
The Reserve Bank of India (RBI) offers multiple options for these bulk and repititive payments. Here is a look at some of the options.
ECS was introduced in the early 1990s. There are two options—ECS credit and debit.
ECS credit facilitates one-to-many payments such as dividend and salary, whereas ECS debit facilitates many-to-one payments such as utility and systematic investment plan (SIP) payment.
ECS has reduced the banks’ customers dependence on paper cheques. The ECS facility itself has undergone many changes. It started as a local to a regional system and is now a national system. To use this service, say for SIP payments, you have to first inform the bank. ECS can also be used to transfer funds to non-resident external (NRE) and non-resident ordinary (NRO) accounts. There is no transaction limit for ECS. The banks originating this transaction are required to pay a nominal charge of 25 paise per transaction to the clearing house and the destination bank. For consumers, there is no charge for this.
NACH was introduced in December 2012 by the National Payments Corporation of India (NPCI), an arm of the central bank that handles retail payments. It is a centralised system for bulk and repetitive payments. ECS is slowly being subsumed by NACH.
For instance, mutual funds started using this service for SIPs from May 2016, replacing ECS. To use NACH, you will have to fill up an NACH form.
Once NPCI gets your mandate, it sends the information electronically to your bank. The bank verifies your details, confirms it to NPCI and then the service is activated. As the process is computerised and works on scanned images of the cheque truncation system, the activation should happen faster. Its format is similar to the cheque truncation system.
APBS was launched in February 2013 by the NPCI. It is used for bulk and repetitive government benefits and subsidy payments. NPCI is responsible for managing this system.
It facilitates operations from Aadhaar-seeded bank accounts, using the biometric authentication. APBS uses Aadhaar number as the central key for electronically channelising the government subsidies and benefits in the Aadhaar-enabled bank accounts.
APBS, as of now, being used by the government departments and agencies for transfer of benefits and subsidies under the direct benefit transfer scheme. The implementation of APBS has led to the conversion of a large number of physical transactions such as cash and cheque to electronic payment transactions.