What is Electronic Clearing Service (ECS)?

BS PRIMER

ECS is an electronic mode of funds transfer from one bank account to another. It can be used by institutions for making payments such as distribution of dividend interest, salary, pension, among others. It can also be used to pay bills and other charges such as telephone, electricity, water or for making equated monthly installments payments on loans as well as SIP investments. ECS can be used for both credit and debit purposes.

How do you avail of an ECS scheme?
You need to inform your bank and provide a mandate that authorises the institution, who can then debit or credit the payments through the bank. The mandate contains details of your bank branch and account particulars. It is the responsibility of the institution to communicate the details of the amount being credited or debited to their account, indicating the date of credit and other relative particulars of the payment. You will know the money has been debited from your account through mobile alerts or messages from the bank.The ECS user can set the maximum amount one can debit from the account, specify the purpose of debit, as well as set a validity period for every mandate given.

What are the processing or service charges levied on the customer?
The Reserve Bank of India has deregulated the charges to be levied by sponsor banks from institutions. Destination bank branches have been directed to afford ECS credit free of charge to the beneficiary account holders. So, it costs you nothing.

How do you discontinue an ECS scheme?
There are two steps you have to follow to ensure appropriate closure. Firstly, the service provider, which is the beneficiary of the payment, will have to be given a written communication in the way stipulated by them, in order to discontinue the services. And next, the bank, which is the channel of payment, will also have to be given a written application stating you would like to discontinue.