Electronic Clearing Service is a mode of electronic funds transfer from one bank account to another bank account using the services of Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension, etc., by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity or charges such as house tax, water tax, etc or for loan installments of financial institutions/banks or regular investments of persons.
How does a beneficiary participate in ECS (Credit)?
The beneficiary has to furnish a mandate giving his consent to avail of the ECS facility. She/he should also communicate to the ECS user the details of his bank branch and account particulars. Such authorization form is called a mandate.
What are the advantages to the ultimate beneficiary?
The end beneficiary need not make frequent visits to his bank for depositing the physical paper instruments.
He need not apprehend loss of instrument and fraudulent encashment.
The delays in realization of proceeds after receipt of paper instrument are totally avoided if this ECS mode is available.