The full form of NECS is National Electronic Clearing Service.

The world is going digital and so do our nation. Cashless or electronic mode of services are the new normal in the current scenario. In this article, we will talk about Electronic Clearing service (ECS)

• Electronic clearing service is an electronic mode of funds transfer that can be repetitive and periodic in nature.
• It is used by organisations for making bulk payment of amounts towards distribution of dividend, salary, pension, etc., or for bulk collection of amounts towards dues, tax collections, loan installment repayments, etc.
• It basically facilitates bulk transfer of funds from one bank account to many bank accounts or vice versa.
• This service includes transactions processed under National Automated Clearing House (NACH) operated by National Payments Corporation of India (NPCI) under Payment and Settlement Systems Act 2007

1. Short Title of the Scheme

The Scheme shall be called ‘Electronic Clearing Service (Credit) Clearing’ and hereinafter will be referred to as ECS (Credit).

2. Objective

The objective is to provide an alternative method of effecting bulk and repetitive payment transactions which would obviate the need for issuing and handling paper instruments and thereby improve payment efficiency and also facilitate better customer service by banks / companies / corporations / Government departments effecting the payments.

3. Definitions

i) User – Refers to the companies / corporations / Government departments or any other institutions effecting bulk payments to a large number of beneficiaries, under the scheme.

ii) Sponsor Bank – Refers to the bank which acts as the agent of the User to submit the input data containing payment instructions prepared by the User to the National Clearing Cell (NCC) / NPCI/ Clearing House (CH) /Clearing Agency and gives a mandate to RBI / NPCI/ Clearing House / Clearing Agency designated by RBI to debit its account on behalf of the User.

iii) Reserve Bank of India (RBI) – Refers to RBI established under the Reserve Bank of India Act, 1934 (2 of 1934).

iv) National Clearing Cell (NCC) / Clearing House (CH) /Clearing Agency(CA) – Is a functional unit of the local Bankers’ Clearing House or such other agency created/authorised by RBI for processing the payment instructions received on electronic media from the Sponsor Banks and generate relevant clearing reports for settlement of accounts of banks at RBI / Settlement Bank. The institutional arrangements made by RBI shall be final.

v) National Payments Corporation of India (NPCI): An entity authorised by Reserve Bank of India to operate National Automated Clearing House (NACH) under Payment and Settlement Systems Act 2007 as long as the authorisation is not revoked by Reserve Bank of India

vi) Destination Account Holder – Refers to beneficiaries under the Scheme who opt for receiving payments from the User by way of direct credit to their bank accounts.

vii) Destination Bank Branches – Refers to bank branches where Destination Account Holders maintain their bank accounts to which ECS payments are credited.

viii) Electronic Media – Refers to any media / tool to carry data in electronic form such as CD / pen drive, etc., or the data put through a network on the web-site hosted by the NCC / Clearing House / NPCI / Clearing Agency or any other arrangement provided by the NCC / NPCI / Clearing House / Clearing Agency.

ix) NACH(Credit) – Refers to a form of ECS(Credit) operated by NPCI.