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

CCP604(B).32 2
 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.

CCP604(B).32 3
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.

CCP604(B).32 4
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.

CCP604(B).32 5
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.

CCP604(B).32 6
STRUCTURE:

 ESC (Debit)

 ESC Benefits

 Service Charges

 Summary

 Quiz

 Assignment

CCP604(B).32 7
ECS-DEBIT

 OPERATION CYCLE OF ECS (DEBIT).

 The operation of the electronic clearing

system as regards ‘debit’ is mapped out

below:

CCP604(B).32 8
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.

CCP604(B).32 9
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.

CCP604(B).32 10
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.

CCP604(B).32 11
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.
CCP604(B).32 12
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.

CCP604(B).32 13
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.

CCP604(B).32 14
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.

CCP604(B).32 15
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.

CCP604(B).32 16
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.

CCP604(B).32 17
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.
CCP604(B).32 18
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.
CCP604(B).32 19
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.
CCP604(B).32 20
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
CCP604(B).32 21
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

CCP604(B).32 23
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.

CCP604(B).32 24
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.

CCP604(B).32 25
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.

CCP604(B).32 26
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.
CCP604(B).32 27
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.

CCP604(B).32 28
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.

CCP604(B).32 29
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.

CCP604(B).32 31
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.
CCP604(B).32 32
Frequently Asked Questions

 Briefly explain the operation cycle of ECS-Debit

 Explain the benefits of ECS system.

CCP604(B).32 33