Details about Electronic Cleaing Services

Details about Electronic Cleaing Services

For SBI PO - RRB - IBPS PO/ Clerk Exams

Introduction:

• ECS is an electronics mode of payment/receipt for transactions that are repetitive and periodic in nature. ECS is used by institutions for making trunk payment or trunk collection of amounts. Basically,  ECS  facilitates  bulk  transfer  of  monies  from  one  bank  account  to  many  bank accounts or vice versa.
• The Reserve Bank of India (RBI) offers the Electronic Clearing System (ECS) for faster payments and collections. By repetitive and periodic, it is meant that the transactions occur repetitively and after a fixed time interval.

First of all, there are two variants of ECS –

1. ECS Credit
2. ECS Debit

• ECS Credit is used by an institution for affording credit to a large number of advantage having accounts with bank branches at various locations within the jurisdiction of an ECS Centre by developing a single debit to the bank account of the user institution.  ECS Credit enables payment of amounts towards distribution of interest, pension, dividend, salary etc., of the user institution.
• ECS Debit is used by an institution for raising debits to a large number of accounts fostered with bank branches at various locations within the precinct of an ECS Centre for single credit to the bank account of the user institution.

ECS Credit:

• ECS Credit payments can be introduced by any institution (called ECS Credit User) which needs to make trunk or repetitive payments to a number of beneficiaries. The institutional User has to first register with an ECS Centre.
• The User has to also get the consent of beneficiaries (i.e., interest, the recipients of salary, dividend, pension etc.) and get their bank account particulars prior to participation in the ECS Credit scheme.
• The beneficiary account holders are required to give injunction to the user institutions to enable them to afford credit to their bank accounts through the ECS Credit scheme.
• ECS can be used to transfer money to NRE and NRO accounts in the country subject to FEMA and Wire Transfer guidelines.

Benefits –

1. Cost effective;
2. The beneficiary need not visit his / her bank for depositing the paper documents which he would have otherwise received had he not opted for ECS Credit.
3. The beneficiary receives the funds right on the due date.
4. The beneficiary need not be apprehensive of loss / theft of physical instruments or the possibility of fraudulent encashment thereof.

ECS Debit:

ECS Debit transaction can be introduces by any institution (called ECS Debit User) which has to receive / collect amounts towards telephone / tax collections / water dues, cess / loan installment repayments / electricity periodic investments in mutual funds, insurance premium etc.

 It is a Scheme under which an account holder with a bank branch can approve an ECS User to recover an amount at a prescribed frequency by raising a debit to his / her bank account.

Benefits –

1. Cost effective.
2. The debts to customer accounts would be consulted by the ECS Users, and the
3. Customers alerted accordingly.
4. Customers need not keep track of due date for payments.