What is National Automated Clearing House (NACH)?

Millions of payments transactions are taking place in the banking system daily. These payments are done by the individuals, corporate and government; and clearing them will be a huge task. For convenience, the clearing of these payments should be done electronically. Such an electronic clearing system was developed by the National Payment Corporation of India (NPCI) and it is known as National Automated Clearing House (NACH).

NACH is a web based platform to facilitate interbank, high volume, electronic transactions for Banks, Financial Institutions, Corporates and Government. It basically functions like an electronic clearing service available especially for banks.

NACH was launched by the National Payment Corporation of India (NPCI). It is very useful to clear bulk and repetitive transactions that takes place among banks.

NACH System is used for making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension etc. and also for bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium etc.

NACH has two wings – ECS Credit and ECS Debit. Similarly, local, regional, national ECSs are also operational.

Features of NACH

NACH is a centralised system, with an aim to consolidate multiple Electronic Clearing Systems (ECS) running across the country. It provides a framework for standard and practices for clearing and removes local barriers for payments. NACH system covers the entire core banking enabled bank branches of the country irrespective of the location of the bank branch.

 Under NACH, the NPCI provides a single set of rules (operating and business), common across all the Participants, Service Providers and Users etc. NACH system also supports Financial Inclusion measures initiated by Government and different agencies.

The NACH system helps member banks to design their own products besides addressing specific needs of the banks and corporates. It also has a Mandate Management System (MMS) and an online Dispute Management System (DMS) coupled with strong information exchange and MIS capabilities.

 NACH is a robust, secure and scalable platform to the participants with both transaction and file based transaction processing capabilities.

 NACH’s Aadhaar Payment Bridge (APB) System has been successfully channelizing Government subsidies and benefits (DBT) to the intended beneficiaries using the Aadhaar numbers. The APB System links the Government Departments and their sponsor banks on one side and beneficiary banks and beneficiary on the other hand.