ECS Full Form | What is ECS & Electronic clearing service?

In this post, you guys understand the ECS Full Form and other concepts related to ECS like history, How many types of ECS are there, how ECS credit and debit works, process, advantages, What is ECS full form in banking, How many types of ECS are there, and more.

ECS Full Form:

The ECS Full Form is an Electronic clearing service. An electronic clearing service is an electronic mode of fund transfer from one bank account to another bank account. It also helps electronic credit or debit transactions from the customer account. An Electronic clearing service is generally used for transactions are repetitive and periodic in future. 

It is part of the payment system but a little bit different from normal.  Electronic Clearing Service is used when there is a requirement to transfer money from one account to multiple accounts, we can say that ECS is a payment system is used when the number of transactions is high.

 Example:

 Companies where they transfer salaries to their employees.

History of ECS Full Form:

Electronic clearing service is given a faster method to the transaction the payment for periodic and repetitive payment. This payment method introduces by the Reserve bank of India.

Types of ECS :

1. ECS Credit
2. ECS Debit

ECS Credit:

ECS credit facility can be used when an entity needs to transfer funds too many individual accounts.  Example:  companies.

ECS Credit enables payment of amount towards the distribution of dividends, salaries, pension, etc of the user institution. 

How is the ECS scheme is works?

First ECS credit users have to register India ECS center defined by the Reserve Bank of India that list available on the RBI official website.  ECS credit user has to take permission from the bank for the ECS credit. ECS credit users have to give information and document related to the account to the bank like

• Name
• Bank
• Branch
• Account number
• MICR code

MICR Code: It is a unique code of digits number that identifies the ECS credit user bank location.  In these 9 digits code, the first three digits identify the city or location of the user, the next three digits identify the bank and the last three digits identify the branch of the bank.  This MICR code presents only on a cheque of the user bank.

On a particular day, the amount is transferred to the multiple accounts, that particular day is called settlement Day.

Process of ECS Credit:

On the settlement day, the amount is debit from the ECS credit user, that amount is transferred to the ECS center then ECS Centre transfers that money to the destination Bank. Then the destination bank transfers the amount to the multiple accounts.

Service charge levied under ECS credit user:

1. ECS credit user has to pay the Processing of service charge. ECS credit user has to pay 25 paise per transaction to the clearinghouse and destination bank.

2. In case of delay credit by the destination Bank. RBI LAF Repo Rate +2% from the due date to actual date credit date to the destination bank. This delay charge is made by the Reserve Bank of India.

3.  In case of failure of transaction amount in the destination bank, the amount is transferred to ECS centre and then ECS Centre Transfer amount to the ECS user.

ECS Debit:

ECS debit is used when banks or Financial institutions want to take out money from different individual customer’s bank accounts.

 It is useful for payment of telephones, electricity bills, tax collection, periodic investment in mutual funds, etc, which are repetitive in nature.  

 How ECS Debit scheme work?

ECS debit user has to register in the ECS Centre that is defined by the Reserve Bank of India. ECS debit user has to take authorization from the customer bank in the form of bank particulars.  The ECS debit user has to give some information and document have to bank like:

• Name
• Bank
• Branch
• Account number
• MICR code

MICR Code: It is a unique code of digits number that identifies the ECS credit user bank location.  In these 9 digits code, the first three digits identify the city or location of the user, the next three digits identify the bank and the last three digits identify the branch of the bank. This MICR code presents only on a cheque of the user bank.

ECS debit user has to fix a particular date on that date the amount is debit from the account, that date is called the settlement date.

The processing information is sent to the ECS centre. 

 On the settlement date, the ECS center sends a request to the customer Bank to transfer the money to the ECS center.  The customer bank debit amount from the account and transfers to the ECS center, then the debited amount is transferred to the ECS debit user.

Advantages of ECS Debit:

• Customers need not keep tracking of due date for payments.
•  ECS debit mandate charges will take care of automatic debit to the customer account on the due date without the customer have to visit bank branches

Is it possible to stop the ECS Debit process or amount?

Yes, the customer has to give prior notice to the ECS user institution. To ensure that the input file submitted by the user does not continue to include the ECS debit in respect of the mandates withdraw or stop by the customer.

FAQs related to ECS Full Form:

Conclusion of ECS Full Form:

We hope you guys understood the ECS full form and also other concepts related to ECS like definition, types, process, charges, and more. If this post looks informative then let us know in the comment section in ECS full form.

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