ECS (Electronic Clearing Services)

What is Electronic Clearing Service(Debit Clearing &

Credit Clearing)?
The Reserve Bank of India has introduced the Electronic Clearing Service (Debit) Scheme to
provide faster method of effecting periodic and repetitive payment by direct debit to customers
accounts (duly authorised) thereby minimizing paper transactions and increasing customers
satisfaction and Electronic Clearing Service (Credit) Scheme to provide institutions having to
make large number of payments (such as Interest/Dividends) can directly deposit the amount into
the bank accounts of the share-holders/ depositors/ investors without having to issue paper
instruments involving printing of warrants (in costly MICR formats) despatching them by post
(most often by Regd. Post).

Electronic Clearing Service (Debit) envisages "a large number of debits and one credit in the
case of collection of electricity bills, telephone bills, loan installments, insurance premiums etc."
and Electronic Clearing Service (Credit) envisages " a large number of credits and one debit in
the case of payment of Interest/Dividends to customers by institutions.

At how many centres ECS Service is available?

Presently this Service is made available by:

1. RBI at 15 centres viz. Ahmedabad, Bangalore, Bhubaneswar, Chandigarh, Chennai,

Guwahati, Hyderabad, Jaipur, Kolkata, Kanpur, Mumbai, Nagpur, New Delhi, Patna and
Thiruvananthapuram.

2. SBI at 30 centres viz. Agra, Allahabad, Amritsar, Baroda, Bhopal, Cochi, Coimbatore,
Dehradun, Durgapur, Faridabad, Gaziabad, Hubli, Jamshedpur, Kolhapur, Lucknow,
Ludhiana, Madurai, Managalore, Nasik, Panaji, Pune, Rajkot, Shimla, Siliguri, Surat,
Trichi, Trichur, Vijaywada, Vishakhapatnam, and Varanasi.

3. State Bank of Indore at Indore.

What are the benefits under ECS (Debit) & ECS (Credit) ?
1. Faster collection of bills by the Companies and better Cash management by them.

2. Eliminates the need to go to the collection centres/banks by the customers and no need to
stand in long 'Q's for payment.

3. Loss of instruments in transit or fraudulent encashment thereof totally eliminated.

4.Payment on due date.
 4. effortless receipt.
Automatic debiting/crediting to the accounts once the mandates are given by the
customers to that effect cuts down the procedural delay.

Limit: There would be no per transaction limit for ECS, EFT transactions with effect from
November, 01, 2004.

Service Charge: To encourage electronic mode of payment which is fast and efficient, Service
Charge for ECS for beneficiary is free of cost and for user is negotiable.

Electronic Clearing Service (ECS) is a mechanism of electronic funds transfer for transactions
that entail an outgo of specified amounts at regular intervals. It is used by corporates to make
various payments to their employees or investors; banks for accepting EMIs (equated monthly
instalments) and utilities to collect payments for various bills.

Out of the two variants of the facility, that is, ECS Credit and ECS Debit, it is the latter that
primarily concerns an individual user — termed beneficiary in this context. Individuals intending
to make payments to these utilities or discharge their EMIs have to sign up with these entities to
participate. From the individual’s point of view, ECS mandate is in the nature of issuing standing
instructions to his/her bank for making payments on a pre-decided date. You can also use the
facility to make your insurance premium and EMI payments as well as mutual fund investments
through systematic investment plan (SIP) route.

How does an individual avail of this service?

To avail of this service, you have to give the organisation — for instance, the telephone utility
you pay bills to every month or the fund house in whose scheme you invest SIP — a mandate
that represents your consent to avail of the facility and authorisation to your bank to honour the
payment when due. It contains details such as your name, bank account number, branch, etc,
along with the date on which your account is to be debited. The mandate forms can be obtained
either from the entities’ websites or their designated centres.

What are the charges to be paid to avail of this service?

Typically, banks which carry out your ECS debit instructions do not charge any fee to provide
the service.

What are the advantages of opting for an ECS debit facility?

It obviates the need to keep track of payments to be made and visiting your bank branch to effect
the same. Apart from helping you save on time and efforts, it could also entitle you to discounts
that certain utilities offer to their customers who undertake to make payments through the ECS
mode. For instance, MTNL offers a discount of 1% — capped at Rs 250 per bill — if you opt for
the ECS mode. Similarly, Reliance Energy offers a discount of 0.5% — restricted to Rs 250 per
bill.

The discounts are usually reflected in the subsequent month’s bill. You can also assign an upper
limit for the maximum debit as well as the validity period for the ECS mandate furnished by you.
Remember, ECS-based payments are treated on par with cheques, and therefore, like in the case
of latter, dishonour of ECS instructions is a punishable offence.

Can one withdraw the ECS mandate whenever he/she chooses?

You can choose to withdraw the mandate by notifying the service provider — say, the utility or
the lending bank — in advance, in the format prescribed. Likewise, you would do well to inform
your bank to spell out your intention to stop using the facility. This will help you present a strong
case in the event of an erroneous debit.

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Electronic Clearing Service (ECS)

ECS is an electronic mode of funds transfer from one bank account to another
bank account using the services of clearing house. This mode of remittance is
normally used for Bulk transfers from one account to many accounts or viceversa.
This can be used both for making payments like distribution of dividend,
Interest, Salary, Pension, etc. by Institutions or for collection of amounts for
the purposes such as payments to utility companies like telephone, electricity,
water charges or for loan installments of financial institutions / banks or
regular investments of persons.
There are two types of ECS called ECS (Credit) or ECS (Debit). ECS (Credit) is
used for affording credit to large number of beneficiaries by raising a single
debit to an account, such as dividend, Interest, salary payments. ECS (Debit) is
used for raising debits to a number of accounts of consumers / account holders
for crediting a particular institution: e.g. telephone / electricity utilities. ECS
facility is available presently in 68 major centers across India.
Advantages to the ultimate beneficiary:
 The end beneficiary need not make frequent visits to his bank for
depositing the physical paper instruments.
He does not run the risk of loss of instrument and fraudulent
encashment.
The delay in realization of proceeds after receipt of paper instrument if
avoided.
Trouble free – Eliminates the need to go to the collection centers /
banks by the customers and no need not track down payments by last
dates.
Peace of mind – customers also need not track down payments by the
last date.
The ECS users would monitor the debits.