Whenever your EMI falls over the weekend or banking holidays, the lender debits your bank account either a day earlier or on the next business day. Soon, this will change.
From 1 August, the RBI will make the NACH facility available 24x7. The National Payments Corporation of India has implemented the National Automated Clearing House or NACH platform. It facilitates high-volume, repetitive and periodic e-transactions.
Your employer could be using NACH to transfer salaries. The automatic EMI repayment of loans, too, happens through this platform. Governments, corporates and banks use it to distribute subsidies, dividends, interest, salary and pension. They also use it to collect bill payments, loans, investments in mutual funds and insurance premiums.
According to Sanjeev Srivastav, chief risk officer, IIFL Finance, there are many benefits of round-the-clock NACH.
“The lender can send payment requests on the due date, even if it is a holiday. Customers can, therefore, plan their finances better if payments are deducted on time. If there’s auto-debit for a credit card, the customer won’t miss the due date because of holidays," said Srivastav.
Firms using technology for debt recovery and delinquency management look at NACH data to determine customers’ repayment behaviour.
“This is a welcome move and should usher in more efficiency in the banking system. Extending the number of working days for NACH will ensure that the volume of collections will go up and will lower the bounce rate for loans being repaid through NACH mandates," said Anshuman Panwar, co-founder, Creditas Solutions, a company that provides delinquency management solutions.
The NACH mandate will also speed up the processing time for systematic investment plan (SIP) registration and improve investor experience. According to mutual fund distributors, it currently takes 2-3 weeks to register SIPs through NACH. The speed depends on the investor’s bank, with some smaller banks or nationalized banks taking longer for registration.
“As of now, most SIPs are scheduled for the 10th of every month followed by 5th, 15th and 20th. If distributors are confident of shorter mandate processing times, it will enable them to have wider SIP start/cycle dates. This will also possibly reduce the load on online MF platforms on specific days," said Ganesh Ram, CEO of Mutual Fund Utilities (MFU), an online mutual fund investment platform.
Delay or failure of NACH registration is the most frequent complaint from investors, and this can come down with the new rules, he said.
tinesh.b@livemint.com
