Do you also Google a very common question, ‘Is NACH Safe?’ If you do, the answer is ‘Yes’ because it is managed by the Reserve Bank of India (RBI).
Launched by National Payments Corporation of India (NPCI) for government, banks, financial institutions and corporates, the National Automated Clearing House (NACH) is a unique payment solution. It helps you in interbank electronic transactions which are repetitive in nature. If you are a company or an individual who wishes to make bulk payments or high volume transactions like salary, dividends, subsidies, interest, loans, investments in mutual funds, etc. you can easily do that through NACH.
Being a centralized system, NACH removes local barriers so that an individual can easily complete his transaction quickly irrespective of the geographical location of the bank. Through NACH, NPCI ensures to follow rules that are common across all users, participants, service providers, etc. Also, NACH has been crafted with utmost care to provide high-level security to your personal data along with a multi-level data validation facility that can be accessed by you PAN-India.
There is so much more to NACH! Knowing all about it would further make things simple for you, just like you binge-watch your favourite NETFLIX series. Let’s quickly go through the types of NACH transactions, how it functions, followed by its fascinating benefits.
There are two types of NACH transactions:
- NACH Credit: NACH credit is a service governed by RBI that allows the government as well as private organizations/corporates to make bulk payments. This electronic payment service ensures that if an organization is authorized under the guidelines of RBI, it can directly make huge payments to the bank accounts of various beneficiaries. With the help of this service, payments like salary, pension, dividends, interest, etc. can be quickly processed.
- NACH Debit: NACH debit is quite similar to NACH credit and the only difference is that it allows banks, NBFCs and other financial institutions to accept huge payments without any interference from the third party. It allows in the collection of bulk payments like loans, EMIs, tax, utility charges, etc. without any hassle.
How Does NACH Work?
For example, Mohan started a SIP for 6 years from ABC Fund and wishes to contribute the monthly amount through NACH mandate. He will follow the below steps to complete the process.
- Firstly, he will fill NACH mandate form shown below and the ABC Fund will collect it
- In the next step, the ABC Fund will cross-check the details mentioned by him in the form
- Once the details are verified, the form is forwarded by the ABC Fund to its respective bank
- After that, the NACH mandate will be shared by the bank with the NPCI which will later be forwarded to Mohan’s bank
- Once the mandate is approved by Mohan’s bank, the fund gets the authorization to debit the amount from Mohan’s bank account for a fixed tenure
What Are The Benefits Of NACH?
- NACH simplifies the process of transactions by eliminating the need for manual transactions and hence, saves a lot of time and money
- It lets you transact the money smoothly and quickly without any inconvenience
- You do not need to remember the due dates of payments as the amount for all the payments happening through NACH gets automatically deducted through the registered banks
- It also lets you avoid processing charges involved in other modes of transactions like a cheque
- If you make payments through NACH, you can easily avoid regional as well as geographical barriers and can transact on the same day PAN-India
- NACH provides a high level of security to all the users and ensures to keep their personal data safe
- You can get the SIP registered through NACH if you wish to invest in the mutual funds
Due to its PAN- India availability, multi-level security and same-day debit feature, NACH has revolutionized the process of transactions. It has not only eliminated the disadvantages of Electronic Clearing Services (ECS) but has also offered affordable solutions to its users.
NACH is here to assist you in the long run.
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