NACH is a new centralized payment transaction system to simplify your bulk and regular payment across various banks, corporates, government, financial institutions, mutual funds SIP etc.
NACH aims to replace existing ECS mandate across the country. A single NACH mandate works for multiple transactions thus it is much more efficient than existing NEFT or RTGS. Also, NACH will considerably reduce the turnaround time and simplify Aadhaar based benefit transactions.
Step-by-step process of NACH mandate
- Mutual Fund Institutions collects the NACH mandate form from investors. With the signed mandate, the Investors authorise the bank to debit a certain amount to enable investments in a mutual fund SIP for a certain period and at a certain frequency.
- Once this NACH mandate verified by Mutual fund agencies, they will forward the NACH mandate form to its bank.
- Then, the bank shares this NACH mandate with NPCI (National Payments Corporation of India).
- Once the Investors information is validated, the NPCI shares the NACH mandate to the customer’s bank for approval.
- Once approved by the customer bank, the Mutual Fund agency is authorized to collect funds from the customer’s account.
Step-by-step process of NACH registration
- NACH Registration is a one time process per folio that you hold in a mutual fund scheme.
- Investors need to fill and submit the duly signed ‘OTM Form’
- With this form, Investors has to attach a cancelled cheque which will help the Mutual fund house to validate the bank account.
- Investors must mention mandatory details like personal contact details, bank details including account number, bank name and branch details. Apart from this, he/she must also mention the amount or daily limit that can be debited.
- Every Mutual fund folio needs a separate mandate. If you have SIPs in different fund houses, you need to fill in separate NACH forms.
Important points to remember
1. All your existing SIPs will continue to run till the time you have given for ECS mandate. Once your current ECS mandate ends, it is mandatory to fill in a NACH mandate form for the future transactions.
2. NACH mandate can either be given for a fixed period or permanent till you cancel it.
3. The NACH mandate default date has been set to 31/12/2099.
4. You can cancel the NACH mandate anytime by submitting the NACH cancellation form.
5. NACH can also be used for various recurring payments like Credit card payments, utility bills like electricity, insurance premiums, donations etc.