NACH replaces ECS

If you are looking to invest in a fund through SIPs, you will need to go with the National Automated Clearing House (NACH) mandate forms from May 1 and not the standard Electronic Clearing Service (ECS) that many were used to. The move is in your benefit because typically registering an SIP through ECS mandate takes about 2-4 weeks. In case of NACH, the turnaround is expected to reduce to only up to 10 days as banks have to answer within T+5 days to confirm the transaction. Moreover, NACH is cost effective in comparison to ECS as it entails less paperwork.

According to the industry body Association of Mutual Funds of India (AMFI), the current SIP registration process would remain the same with the ECS forms being replaced with NACH forms that distributors need to collect from investors. For existing SIP investors with ECS mandates, it is status quo with their SIPs that are active and running. NACH is a one-time registration process which gives flexibility to investors to invest lump sum and through SIP without having to make individual payments each time.

There are other advantages of NACH over ECS. Unlike multiple ECS mandates that one need to invest in different fund schemes through SIPs, with NACH, investors and distributors can register multiple SIPs through one mandate. This process is also simpler for lump sum investments.

olmdesk@outlookindia.com