NPCI NACH Team vide Cir No 24 dt
August 18th 2023, introduced the Penalty Policy for high %age of NACH
Debit Transaction Returns.
The circular highlights are as follows:
NPCI has informed NACH Member
Banks to refer to the various communications from NPCI highlighting the
elevated percentage of returns in ACH debit transactions.
In light of this, it is strongly
recommended that all stakeholders proactively undertake the following measures:
01) Limit the display of returned
transactions to twice, comprising one initial presentation and two subsequent
representations.
02) The representation of a
returned transaction can only take place three days after the return date.
03) Representation should occur
only upon receiving confirmation from the respective customer regarding the
availability of sufficient balance.
04) In the event of recurring
returns:
a. User institutions should
establish communication with the customer to ensure that the presentation
resumes only after receiving confirmation to honor the debit transactions.
b. Destination banks must assess
the account's operations, advise the customer to maintain an adequate balance,
and, if no improvement occurs, adhere to regulatory guidelines for managing
such accounts.
Despite issuing repeated
advisories to all relevant parties, it has come to NPCI's attention that the
percentage of returns remains significantly above acceptable thresholds.
To instill clearing discipline,
the following measures will be gradually implemented according to the provided
schedule:
Phase I With
effect from 1st October 2023:
1. Additional charges of Rs. 1
per return transaction to be levied on corporate with returns above 50%.
Phase II - With
effect from 1st January 2024:
1. Rs. 5 per return transaction
for corporate with return above 50%. Additional Charges will be for transaction
over and above the threshold ie.50%
Phase III - with
effect from 1st April 2024:
1. The corporates with return
transaction above 30% will be barred from registering new mandates.
2. The utility code will be
barred for registering further new mandates until the returns are brought down
below the 30% threshold.
NPCI has advised all stakeholders
to take immediate remedial measures ensure adherence to the clearing discipline
and reduce the returns.
The National Payments Corporation
of India (NPCI) has taken a significant stride in revolutionizing electronic
transactions with the introduction of the "National Automated Clearing
House (NACH)."
This web-based solution has been
meticulously designed to cater to a broad spectrum of stakeholders, including
banks, financial institutions, corporates, and government bodies.
NACH Debit service, a critical
component of NACH system, brings electronic automation to interbank high
volume, low-value debit transactions.
At present, the NACH transactions
can be processed on all days of the week, i.e Sundays and holidays too.
These transactions, characterized
by their frequent and repetitive nature, are seamlessly processed through the
NPCI platform.
This unified and standardized
framework resolves bottlenecks and challenges associated with electronic
transmission, both at the local and national levels, thereby contributing to
the growth of core banking services.
One of the key functions of the
NACH System is to serve as a robust platform for executing bulk transactions.
This functionality proves
invaluable in scenarios such as the distribution of subsidies, dividends,
interest, salary disbursements, and pensions.
Additionally, it facilitates bulk
collections of payments for various utilities and financial services like
telephone bills, electricity charges, water bills, loan repayments, mutual fund
investments, and insurance premiums.
At its core, the National Automated
Clearing House (NACH) represents a centralized system with a grand vision. It
seeks to consolidate and harmonize the multitude of Electronic Clearing Service
(ECS) systems operating throughout the country.
By doing so, it aims to establish
a standardized framework and eliminate local barriers, thus promoting seamless
interbank transactions. Furthermore, NACH's reach is expansive, covering the
entire network of core banking-enabled bank branches across the nation,
regardless of their geographic location.
It offers a single set of rules
encompassing operational and business aspects, open standards, and industry
best practices.
These provisions are designed to
ensure consistency in electronic transactions for all participants, service
providers, and users.
In addition to its overarching
objectives, the NACH system empowers member banks with customization
capabilities. It allows banks to design their own products and caters to
specific needs through features like a refined Mandate Management System (MMS)
and an online Dispute Management System (DMS). These tools are complemented by
robust information exchange and customized Management Information System (MIS)
capabilities.
Disclaimer: These are my personal
views only. The bottom line is Safe ePayments.
