Under the scheme, you can give standing instructions to the bank you hold an account with authorizing the transfer of an amount at a prescribed frequency to the designated recipient. This is especially useful for payment of loan EMIs, as well as regular bills.
You can even use the ECS facility to make regular contributions to your Public Provident Fund account. ECS is also used by financial institutions and organizations for making automated payments such as dividends, and salaries and pensions.
To start an ECS, you have to sign a form authorizing the payment instructions given to your bank. You need to furnish your bank account details in the form and sign it before submitting it. While there is a service charge applicable to ECS transactions, it is typically much lower than that charged on other fund transfer services like NEFT.
Having an ECS mandate in place can make life easier by ensuring that you don’t miss EMIs or bill payments. However, make sure your bank account has adequate funds, because if the ECS bounces, you might be required to pay a penalty equivalent to that applicable to a bounced cheque.