e-NACH & e-Mandates

Tanisha Sabherwal
Tanisha Sabherwal
August 28, 2021

e-NACH stands for Electronic National Automated Clearing House. eNACH & e-Mandates are mechanisms to allow smooth modes of recurring payments. While signing up for insurance or an SIP via e-Mandate, the payments can be scheduled every month without any need of human intervention.

ECS and e-NACH

ECS or Electronic Clearing System is an offline recurring payments process where physical documents are filed and checked manually. ECS is governed by RBI wherein RBI and selected banks acted as clearing house. It had some issues by design:

  1. Cumbersome to handle physical documents which can be subject to wear and tear.
  2. Lengthy process, took around 21 for the validation.
  3. Higher failure/bounce rate.

NACH by NPCI is also a physical process with paper mandate but it is faster than ECS because the scanned images are used for processing. Hence, the validation time is reduced and the conversion is better.

What is good with e-NACH?

e-NACH eliminates the only physical step in the NACH process, filling the form. The process is faster with minimal human intervention and logistical dependency.

e-NACH process

E-NACH flow

E-NACH flow

Sponsor bank: The banks enrolled with NPCI to facilitate the e-mandate process. List of banks enrolled for e-mandates.

Destination bank: Customer's bank which holds the account from which the amount is to be deducted.

What are e-Mandates?

e-NACH is governed by NPCI whereas e-mandates are looked over by individual banks. Currently only 4-5 banks support the service.

e-Mandates are set up via net-banking which is its primary mode of payment. These mandates can be set up via the merchant's website after completing a one-time net-banking transaction after which no customer invention is required.

On completion of a successful transaction, the status confirmation of the registered mandate is reflected in T+1 days. The mandate debit request however to be triggered 2 days before(T-2) so that account can be deducted on T day.

Resources: Signdesk, Razorpay, Veri5Digital