ECS (Electronic Clearing Service) allows for electronic funds transfer between bank accounts using a clearing house. It facilitates bulk payments from one account to many accounts (ECS Credits) or collection of funds from many accounts to one account (ECS Debits). The process involves an ECS user initiating transactions by submitting data to a clearing house, which then debits the user's sponsor bank and credits recipient banks for onward crediting to beneficiary accounts. This electronic system provides advantages over paper-based payments like avoiding loss of instruments and ensuring timely credit of funds.

1. Electronics Clearing Services
ECS

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Objectives
At the end of the session the Students should
be able to:
Define what is ECS (Credits) ECS (Debits)
Explain the procedure of ECS
List the Advantages of ECS systems
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3. ECS user /Institution
Sponsor Bank
RBI/Nodal
Clearing
House
SBI Bangalore
Can Bank
Hyderabad
Beneficiary Bk
Branch at
megistic
Branch at MG
Raod
Branch at
Labbipet
Branch at
somajiguda
AT Dif
cities RBI
Synd Bank
Mumbai
Branch at Fort
Branch at VT

4. •
What is Electronic Clearing Service (ECS)?
It is a mode of electronic funds transfer from
one bank account to another bank account
using the services of a Clearing House.
Bulk transfers from one account to many
accounts (ECS Credits).
Collection of amounts from many accounts to
one account. (ECS Debits).
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Types of ECS
ECS (Credit)
Dividend, Pension,
Interest , Salary
payment,
Sponsor Bank, Beneficiary Bank
ECS (Debits)
House tax, Water tax
Telephone, Electricity

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Who can initiate an ECS (Credit) transaction?
ECS payments can be initiated by any institution
(called ECS user) who have to make bulk or
repetitive payments to a number of beneficiaries.
They can initiate the transactions after registering
themselves with an approved clearing house
Consent of beneficiary is required, and Account
details have to be obtained

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Can the Account Details be Changed?
YES
Who will communicate the beneficiaries' about the
credit?
It is the responsibility of the ECS user to communicate to
the beneficiary the details of credit that is being afforded to
his account,
What are the advantages to the ultimate beneficiary?
No depositing the physical paper instruments.
No risk of loss of instrument and fraudulent encashment.
No delay in realisation of proceeds.

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How does the ECS Credit system work?
The ECS users intending to effect payments have to
submit the data in a specified format to one of the
approved clearing houses.
The clearing house would debit the account of the
ECS user through the account of the sponsor bank
on the appointed day and credit the accounts of the
recipient banks, for onward credit to the accounts of
the ultimate beneficiaries.

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At which of the centres ECS facility is available?
At present ECS facility is available at more than 60
centres. The beneficiaries need to maintain an account
with one of the banks at these centres in order to avail of
the benefit of ECS.
How does a beneficiary participate in ECS (Credit )
scheme?
The beneficiary has to furnish a mandate giving his
consent to avail of the ECS facility. He should also
communicate to the ECS user the details of his bank
branch and account particulars. Such authorisation
form is called a mandate.

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How does the scheme benefit the ECS user-like
corporate bodies/ institutions?
Saves on administrative machinery for
printing, dispatch and reconciliation.
No loss of instruments in postal transit.
Avoids fraudulent encashment.
Ensuring credit on the designated date to
beneficiaries' account.

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What are the advantages to the banks?
Get freed of paper handling.
Paper handling also creates lot of pressure on banks
as they have to encode the instruments, present
them in clearing, monitor their return and follow up
with the concerned bank and customers.
In ECS banks simply get the payment particulars
relating to their customers. All they need to do is to
match the account particulars like name, a/c number
and credit the proceeds
Wherever the details do not match, they have to
return it back, as per the procedure

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Is there any limit on the amount of Individual
transactions?
No value limit on the amount of individual
transactions has been prescribed under the scheme.
Who can Avail this Facility?
Any ECS (Debit)user desirous of participating in the
scheme has to register with an approved clearing
house and submit the data in specified form through
the sponsor bank to the clearing house. Banks will
treat the electronic instructions received through the
clearing system on par with the physical cheques.

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What are the advantages to the ultimate
beneficiary?
No need going to the collection centres/banks
No need to stand in long ‘Q’s for payment
No tracking down of payments by last dates.
The debits would be monitored by the ECS users
How can the customer track-down these
payments?
Pass-books/statements given to the customers
reflect the particulars of the transaction. Customers
can match these entries with the advice received by
them from the payment institution.

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How does the scheme benefit the ECS user-like
corporate bodies/ institutions?
Saves on administrative machinery for collecting the
cheques,
monitoring
their
realisation
and
reconciliation
Better cash management.
Avoids chances of frauds due to fraudulent access to
the paper instruments and encashment.
Realise the payments on a single date instead of
fractured receipt of payments.

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Can the customer stipulate any maximum
debit, purpose or validity period for the mandate?
Yes. It is left to the choice of the individual customer and
the ECS user to finalise these aspects. The mandate
can contain a maximum ceiling; it can also specify the
purpose as also a validity period.
What is the current coverage of the scheme?
At present the scheme is in operation at 15 RBI centres
(ie centres where RBI manages the Clearing House
operations) and at other centres where Public Sector
Banks manage the clearing operations. The list of
centres is available at the RBI web-site under the
procedural guidelines.

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Which are the institutions eligible to participate in
the ECS Debit scheme?
Utility
service
providers
such
as
telephone
companies, electricity supplying companies, electricity
boards, credit card collections, collection of loan
installments by banks and financial institutions, and
investment schemes of Mutual funds, etc.

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What are the Processing charges/Service
charges on individual transactions (ECS Debit)
Is there any ceiling on the amount
What is the current coverage of the scheme ECS
(credits), ECS (Debits)?
Who has introduced this ECS Scheme
EFT is a result of Which committee report?
Home work

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Day-0
1.Submission of encrypted Input
Tape/Floppy fully validated by NCC
earlier with a mandate from the
Sponsor Bank in the morning.
2.Processing at NCC- Generating out put
data in magnetic media and their
encryption for onward transmission to
Destination banks

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3. NCC making available out put data in
magnetic media duly encrypted to
Destination Banks in the morning hours
along with MICR Clearing Reports
4. Destination Banks (Service Branches)
generating the clearing reports from
the output tape/floppy supplied by NCC
after
decrypting the same.

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5. Service Branches of Destination Banks
ensuring accounting of the transactions
either centrally or at the destination
branches either by giving soft copy of
the transaction details or delivering the
hard copy of the Destination Branch
Reports and Destination Ledger Reports
(in
duplicate) to the respective branches.

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6. NCC making available Sponsor Bank
Settlement Report to the Sponsor Bank.
Day-1
1. Sponsor Bank’s account debited and
Destination Banks’ accounts credited
at Deposit Accounts Department of RBI

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2. Destination Bank branches crediting the
accounts of the beneficiaries (i.e. the
Destination Account Holders) and
Sponsor
Bank debiting the account of the User.
3. Destination Bank branches reporting the
un credited items to the Service Branch
on
the duplicate of the Destination Ledger
Reports.

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4. Service Branches of Destination Banks
preparing floppy file for reporting to NCC, the
particulars of credited /un credited items,
preparing two hard copies of the Destination
Banks Final Report in Form Appendix XVII
and submitting the output tape/floppy to the
NCC together with the return memos and a
hard copy of the Destination Bank Final
Report to the NCC-while presenting the day’s
MICR instruments for clearing.

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5. NCC to arrive at the settlement based
on the tapes/floppies received from all
the Destination Banks.
6. NCC to generate all the relevant reports
7. Destination Bank’s accounts debited
and consolidated credit given to
Sponsor Bank for un credited items.

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8. NCC to supply clearing reportsi) Sponsor Bank Final Report ----- To
Sponsor Bank
ii) Combined list of un credited item------- iii) Two copies of the final output
tape/floppy ----iv) Destination Bank Final Report--------

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DAY-0
1. Submission of encrypted Input
Tape/Floppy fully validated by the CH
earlier with a mandate from the Sponsor
Bank in the morning.
2. Processing and generating output data at
the CH in magnetic media and their
encryption, for onward transmission to
Destination Banks

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3. The CH making available output data in
magnetic media duly encrypted to
Destination banks with MICR Clearing
Reports.
4. Destination Banks (Service branches)
generating the clearing reports from the User
Status File/floppy supplied by the CH, after
decrypting the same.

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5. Service branches of Destination Banks
delivering the hard copy of the Destination
Branch Reports and Destination Ledger
Reports (in duplicate) or the same in
electronic form to the respective branches.
6. The CH making available Sponsor Bank
settlement Report to the Sponsor Bank.

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DAY-1
1.Destination banks' accounts debited and Sponsor
Bank's account credited at Deposit Accounts
Department of RBI/ the Settlement Bank.
2.Destination bank branches debiting the accounts of
the beneficiaries (i.e. the Destination Account
Holders) and Sponsor Bank crediting the account of
the User
3.Destination Bank Branches reporting the un debited
items to the Service branch on the duplicate copy of
the Destination Ledger Reports.

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4. Service branches of Destination Banks
preparing floppy file for reporting to the CH
the particulars of the debited/un debited items,
preparing two hard copies of the Destination
Banks Final report in the From Appendix XVII
and submitting the User Status File/floppy to
the CH together with the return memos and a
hard copy of the Destination Bank final report
to the CH - while presenting the day's MICR
instruments for clearing

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5. The CH to arrive at the settlement,
based on the tapes/floppies received
from all the Destination Banks; and
generate all the relevant reports.
6. Destination Bank's accounts credited
& consolidated debit given to Sponsor
Bank for un debited items.

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7. The CH to supply clearing reports
i) Sponsor Bank Final Report- To
Sponsor Bank
ii) Combined list of un debited item- do iii) Two Copies of the final User Status File/
- do –
floppy (one to be forwarded to User)
iv) Destination Bank Final Report- To
Destination Bank