Latest news with #ElectronicClearingService
Mint
2 days ago
- Business
- Mint
ECS/NACH return charges: Meaning, penalties and how to avoid them
In the nation's rapidly evolving and digitising financial landscape, automated payment systems such as Electronic Clearing Service (ECS) and National Automated Clearing House (NACH) have become extremely vital and indispensable for recurring payments for services along with other related transactions. Still, in cases when these payments fail due to one reason or the other, customers are often hit with hefty return charges. Hence, in such a situation you should always keep these five essential points in mind to understand and know about ECS/NACH return charges better. The ECS/NACH mandates permit banks and financial institutions to automatically debit funds from your account for regular payments such as EMIs on personal loans, utility bills, mutual fund SIPs along with other similar transactions. Now in cases where such transactions fail, generally due to insufficient funds, technical glitches or incorrect details then a penalty is levied on the account holder. These charges are known as ECS/NACH return charges. The applicable return charges vary widely between different banks and financial institutions. They are also unique to the type of account an individual holds along with the specifics of the financial institution. For example, Axis Bank charges ₹ 500 for first ECS return and ₹ 550 for subsequent ones. Federal Bank on the other hand levies ₹ 250 for the first return and ₹ 500 for subsequent returns in savings accounts. Whereas for overdraft (OD) and cash credit (CC) accounts a fee of ₹ 350 is attracted for the first time and ₹ 750 for subsequent returns. The State Bank of India and Bank of India both charge ₹ 250 per return, with GST added. Now these fees can quickly climb and add up if multiple transactions fail in a single month. That is why as a well aware user of banking services while applying for a personal loan, credit card or any other related services it is your responsibility to be aware of several hidden charges imposed by banks. Do note, charges are imposed on account holders whenever an ECS/NACH transaction fails. Common reasons for these failures include insufficient funds, incorrect mandate details, technical errors. It is also important to acknowledge the fact that these charges are usually non refundable and are directly deducted from the account automatically. On your part as an account holder hence, do take care of your balance and upcoming transactions. So that you never miss out on any payments or none of your pending transactions are withheld or rejected due to insufficient funds, incorrect mandates etc. Given each charge may seem small individually still, multiple failed transactions can result in significant penalties. For example, if four SIPs of ₹ 500 each fail due to insufficient balance, then the total return charges can reach as much as ₹ 2360 after taxes. This figure is far exceeding the original investment amount in some cases. This can easily disrupt financial plans, long term wealth creation strategies and even strain your budget. Maintain sufficient balance in your account at least a day before any scheduled debit to prevent failed transactions. Track your payment schedules regularly so you're aware of upcoming ECS/NACH debits and avoid last-minute surprises. Update mandate details promptly if you change your bank account, contact info, or switch to a new service provider. Set up alerts and reminders through SMS or mobile banking to stay notified about low balances or due payments. Cancel inactive mandates by visiting your bank and submitting a written request, especially for services you no longer use. Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
Mint
15-05-2025
- Business
- Mint
Personal loan process: Is submitting a blank cheque mandatory? Find out
As personal loans become increasingly accessible in the country, many borrowers are often found questioning the importance and necessity of providing a blank cheque during the submission of loan applications. Now some lenders still request for a crossed blank cheque as a security measure, still it is crucial to understand its implications, whether it is a mandatory requirement and available alternatives. To put it simply, providing a blank cheque is not a mandatory requirement for applying for and obtaining a personal loan. The required documentation and its necessity largely depends on the respective lender and their policies. Depending on individual policies and rules, traditional banks and certain Non-Banking Financial Companies (NBFC's) might request for a blank cheque as a precautionary measure to secure loan repayment, especially in cases where digital repayment methods have failed or are not prudently available. Handing over a clean signed blank cheque carries several inherent risks. If misused, it can lead to unauthorised withdrawals or legal complications under the Negotiable Instruments Act. That is why to combat the same challenges borrowers are advised to: Mention 'Account Payee Only' to strictly prevent misuse. Key a record of the cheque number, a digital copy of the cheque and obtain a written acknowledgement from the lender explaining the objective and conditions for its use. Keep a tab and ensure that the cheque is utilised solely for its intended purpose and is returned upon the closure of loan. Set a validity date or clearly mention 'not valid after' a particular date on the cheque. This limits the timeframe within which the cheque can be presented for clearance. Avoid signing multiple cheques, even if requested to don't agree to such proposals. As when multiple cheques are signed this increases the chances of financial crimes and frauds immensely. With consistent advancements in digital banking, many lenders now prefer electronic methods for loan repayments, such as: Electronic Clearing Service (ECS): Through ECS the borrower's account is automatically deducted for the loan repayment amount on a monthly basis. Through ECS the borrower's account is automatically deducted for the loan repayment amount on a monthly basis. National Automated Clearing House (NACH): Through this centralised system interbank transactions are facilitated and streamlined and help in the repayment of loans. Through this centralised system interbank transactions are facilitated and streamlined and help in the repayment of loans. Standing Instructions: This particular system allows for pre-authorised directives for periodic payments of the loan thus ensuring no EMI is missed. These methods help in enhancing security and reducing the need for physical cheques. That is why while repayment of loans these methods can be considered post proper consultation with your respective financial institution's customer support team. The Supreme Court has held that even a cheque that is issued as security can attract action under Section 138 of the negotiable instrument act. This will be applicable if the cheque was given against a legally enforceable debt. In Triumph International Finance Ltd v. State of Maharashtra (2007), the court clearly established that such cheques are not beyond the scope of dishonour proceedings. Hence, some lenders may still request a blank cheque, it is not mandatory. Safer, digital repayment options are available, offering greater clarity and transparency, along with reduced risk for borrowers. Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
