DEPARTMENT OF TECHNICAL EDUCATION
ANDHRA PRADESH
Name : Raja Sekhar Koduru
Designation : Lecturer in CCP
Branch : Commercial & Computer Practice
Institute : Govt. Polytechnic for Women,
Kakinada, E.G. District
Year/Semester : 3rd Year – VI Semester
Subject code : CCP-604(B)
Topic : Customer Services Offered by Bank
Duration : 50 mts.
Sub topic : Electronic Fund Transfer (EFT)
CCP604(B).32 1
Teaching aids : Power Point & Pictures
OBJECTIVES:
On completion of this topic you will be able to Operation
Explain the cycle of ECS (Debit)
List the Benefits of ECS
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Recap
In the previous session we have discussed about the
ECS. Under method of ECS, the institutions having to
make a large number of payments can directly
deposit the amount into the bank accounts of the
customers.
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Recap…
ECS is two types
1. ECS (Credit): as used with respect to credit
clearing, refers to a system of payment
undertaken by banks such as interest, dividend
etc.
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Recap
1. ECS (Debit): as used with respect to debit
clearing, refers to a system of collection
undertaken by banks such as electricity,
telephone bills, insurance etc.
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Recap…
ECS (Credit) involves the following steps:
a) Preparing payment data
b) Presenting payment data
c) Processing by clearing house
d) Credit the beneficiaries by service branches.
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STRUCTURE:
ESC (Debit)
ESC Benefits
Service Charges
Summary
Quiz
Assignment
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ECS-DEBIT
OPERATION CYCLE OF ECS (DEBIT).
The operation of the electronic clearing
system as regards ‘debit’ is mapped out
below:
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ECS-DEBIT
A) MANDATE:
Obtaining mandate for making payments on behalf of
customers.
The mandate is obtained for making periodic and
repetitive payments to utility companies, banks
institutions
The mandate provides details such as name,
account number, name of bank, branch etc. duly
certified by the bank concerned.
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ECS-DEBIT
B) PREPARATION OF DATA
The user organization prepares transaction data
on electronic media on the basis of the details
furnished in the mandates.
The data is then submitted to the local
clearinghouse, through its sponsor bank.
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ECS-DEBIT
C) ACTION BY CLEARING HOUSE
The local clearinghouse processes the data
after due validation of the same.
Inter-bank settlement are arrived at and
necessary bank-wise reports are generated.
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ECS-DEBIT
D) DEBITING BANK ACCOUNT
Destination banks’ accounts with the clearing house
are debited by the NCC (National Clearing
Corporation)
A consolidated credit is afforded simultaneously to the
sponsor bank’s account.
The clearing house, then furnishes, the bank-wise
reports to the service branches of the destination
banks.
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ECS-DEBIT
E) ACTION BY SERVICE BRANCHES:
Branch-wise reports are forwarded by the
service branches to the respective branches for
debiting the accounts of the customers with the
amount indicated therein.
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ECS-BENEFITS
1. COST SAVINGS:
ECS is undoubtedly is a cost saving method.
The cost administration presenting being incurred for
printing of paper instruments in MICR format and
dispatching by registered post etc. are saving
enormously.
ECS would be beneficial to all corporate companies,
which have to make periodic disbursals like dividend,
interest, pension, salary etc.
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ECS-BENEFITS
The use of ECS could bring down their administration
burden costs to a bare minimum.
Similarly, automatic debiting to the accounts of
mandated-customers has the effect of cutting down the
procedural delay.
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ECS-BENEFITS
2. NO TRANSIT LOSS:
Another major advantage of ECS is that it
precludes the possibility of any loss of
instruments in transit.
The system also seeks to eliminate fraudulent
encashment of such instruments.
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ECS-BENEFITS
3. AUTOMATIC RECONCILIATION:
The great advantage of the ECS is that the
system facilitates automatic reconciliation of
transactions.
The ECS cycle produces a transaction completion
report, which is sent to the user institution.
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ECS-BENEFITS
4. EFFICIENT CASH MANAGEMENT;
ECS allows for the efficient management of cash
for the user.
Thus it would be sufficient for the user to make the
funds available only on the specified date.
Similarly, there is ensured and faster collection of
bills by the companies…
….thus facilitating better cash management by
them.
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ECS-BENEFITS
5. BETTER CUSTOMER SERVICE:
ECS facilitates better customer service.
The system paves way for the best companies in
the world to pay to their shareholder, investors
and customers.
Further, payments are made on the due date.
Similarly, ECS makes possible effortless receipt
and
..obviate the need for visiting the bank for
depositing the dividend or interest warrant.
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ECS-BENEFITS
6.CONVENIENT MODE:
The ECS affords a convenient mode of clearing both
payment and receipt on the part of the public.
The real beneficiaries could be the members of public.
They need move about or stand in long queues.
They no longer have to fear of loss of instruments in
transit.
There is no risk of fraudulent encashment.
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Issues of ECS
Although the ECS has been introduced with much
fanfare designed to ensure faster and accelerated
payment and collection method…
…there are many reasons as to why the scheme of
electronic clearing system is becoming so popular.
Following are some of the reasons.
a) Lukewarm support shown by corporate, individuals,
institutions etc. in availing ECS
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Issues of ECS
a) ECS largely concentrated in the metro centers as
there is a little awareness about the scheme in all
levels.
b) Inadequate service extended by banks regarding the
information on passbook entries of payment and
collection.
c) Existence of a strong preference among the people
for making payment in cash rather than through ECS
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LIMIT
Reserve Bank of India has prescribed a present
limit of Rs.5,00,000 (maximum) in the case of ECS
(Credit) and…
…Rs.1,00,000 in the case of ECS-debit.
There is no minimum limit
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SERVICE CHARGES
Service charges as applicable to credit-ECS are as
follows:
To promote electronic banking culture, a highly
“concessional” service charge structure has been
adopted.
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Service charges
For the present user (corporate institution) is
required to pay to the clearing house through the
sponsor bank Rs.1.50 per instrument…
….of which Rs.0.50 would remain with the clearing
house and ..
..Rs.1.00 would be credited to the destination bank.
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SERVICE CHARGES
However, charges to be paid by the “user” to
“sponsor bank” have to be mutually agreed.
No charges would be levied by the destination bank
branch for crediting the investor/customer’s
account.
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SERVICE CHARGES
Service charges as applicable ECS-DEBIT are as
follows:
While utility companies are levied nominal service
charges of Rs.3.00..
..out of which sponsor bank Rs.1.00
Clearinghouse Rs.0.50 and
Destination bank Rs.1.50 per transaction
Service for the customers opting for the scheme is free.
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ECS - Acknowledgement
In the case of ECS-Credit, the responsibility of advising
the investor/customer about the amount and due date of
payment rests with the ‘user’ institution.
On crediting the investor/customer’s account the
destination bank branch would indicate the source of
credit in the statement of account / passbook…
..eg. ECS-UTI, ECS-Tata Finance, ECS-ICICI etc.
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Summary
The operation cycle of ECS (Debit) is
Obtaining mandate for making payment.
Preparing transaction data on electronic media
Processing the data by local clearing house.
Debiting the destination bank’s accounts by NCC
Sending branch-wise reports by service branches.
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Summary
The advantages of ECS are
Eliminates postal loss and delay
Eliminates paper work and lengthy procedures
Saves cost of stationary, printing and postage
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Summary
Ensures that no fraudulent encashment takes place.
Facilitates immediate receipt and payment of dues
Leads to automatic reconciliation
Earns appreciation from investors and other
customers.
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QUIZ
What is maximum amount limit prescribed by RBI in
case of ECS-Credit.
Rupees five lakhs.
What is maximum amount limit prescribed by RBI in
case of ECS-Debit.
Rupees one lakhs.
What is minimum amount limit prescribed by RBI in case
of ECS.
No minimum limit.
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Frequently Asked Questions
Briefly explain the operation cycle of ECS-Debit
Explain the benefits of ECS system.
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