What is the full form of ECS

ECS: Electronic Clearing Service

ECS stands for Electronic Clearing Service. It is an electronic mode of funds transfer from one bank account to another bank account. It also facilitates electronic credit/debit transactions associated with customers' accounts. It is usually used for transactions that are repetitive or periodic in nature.

History

The Electronic Clearing Service was introduced by the Reserve Bank of India to provide a faster method for Periodic and Repetitive payment.

Types

An ECS service can be of two types as follows:

ECS Credit: In this ECS, an institution makes credit to your bank account, e.g., your dividends, salary etc. So, a single account is debited periodically to multiple credit accounts.

ECS debit: In this ECS, you make payments as EMI for your loans, mutual funds, the premium of policies etc.

Advantages of ECS

• Maximize customer satisfaction
• Minimize paper usage
• No late payment charges
• Timely payment of bills
• Facilitate customers to pay their essential utility bills like electricity bills, mobile bills, telephone bills etc.
• It also facilitates customers to pay for mutual funds, insurance premiums, credit card payments, loan instalments etc., from this service.

How to get ECS Scheme

You have to inform your bank and provide a mandate for the bank to authorize the institution, which can then debit or credit the payments through the bank. The mandate includes the details of your bank branch and account information. Salaried persons and employees of government or private firms, who have a salary account, can contact bank authorities and sign for ECS.

Cheque Truncation System's Goal

The Cheque Truncation System (CTS) was developed to speed up the collection and clearing of checks and enhance customer service. Also, the solution reduces the extent of clearing-related fraud, reduces reconciliation mistakes, lowers collecting costs, and almost eliminates logistics-related issues. Despite the fact that there are other payment options available, such as RTGS and NEFT, many individuals still prefer using checks. With this in mind, the Reserve Bank of India (RBI) made the decision to improve the effectiveness of the cheque-clearing system. The CTS is a more secure method of exchanging documents than physically moving them from one location to another, which lengthens the time it takes to conduct checks and increases the possibility of them being lost, damaged, or altered while in transit.

Cheque Truncation Method

The technique for clearing a check under CTS is distinct from clearing a check not covered by CTS 2010, as CTS is an image-based truncation mechanism. This is a list of the steps involved in clearing a CTS 2010 check:

• The presenting bank uses a capturing system to record photos and data related to the check.
• The clearing housing will then transfer the recorded data to the paying bank after being properly signed and encrypted by the presenting bank. The Clearing House Interface (CHI), which is offered to both the presenting bank and the paying bank for the purpose of establishing a secure channel of communication, enables both banks to securely communicate data to the Clearing House.
• The Clearing House analyses the data it has received to determine a settlement amount before sending the data and photos to the paying bank. Presentation Clearing is the current procedure. The data needed to start processing the payment is sent by the Clearing House to the paying bank via the CHI. The return file for unpaid instruments is also generated by the CHI of the paying bank.

2010 CTS Cheques

The CTS may process any sort of given check, but a set of guidelines known as the CTS 2010 was created to achieve check standardization and eradicate check fraud. These standards include standardized field positions on the checks as well as numerous security features on them, such as the calibre of the paper used, a watermark, the bank's emblem in invisible ink, a vacant pantograph, etc. The following are some of the new features of a CTS 2010 check:

• Dates can be entered in the boxes using the format dd/mm/yyyy.
• The top of the check is printed with the IFSC number and bank address.
• The left side of the check has the name of the printer along with CTS-2010 printed on it.
• While photocopying a check, a pantograph displaying VOID/COPY appears beneath the account number.
• The rupee sign has taken the place of the multilingual format.
• The bottom right corner contains a signature field.
• In light, the CTS INDIA watermark is discernible.
• On the upper left side is printed the bank's ultraviolet logo, which can only be seen under UV light.

Electronic Clearing Service (ECS) - How to Stop?

You must first let your loan provider know if you want to suspend ECS debits from your bank account for whatever reason. A written application that follows the loan provider's format must be submitted. After completing this, you must also advise your bank of the same by filing a formal application.

So that the appropriate actions can be completed in time, submit the application to the loan provider and your bank at least a few weeks before your EMI debit date.

Important Factors to Consider Before Using Electronic Clearing Service (ECS)

While the ECS feature removes the need for you to write a check or visit an online payment gateway for routine payments like loan EMIs, you still need to make sure that your bank account has enough money in it to cover the ECS.

If the ECS fails due to insufficient money in your bank account, you will typically be compelled to pay a penalty that might be as high as the penalty for a bounced check. Thus, use a little caution while automating your EMI payments utilizing this feature.