Electronic Clearing System (ECS)

A mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House set up by Reserve Bank of India

Normally for bulk transfers from one account to many accounts or vice-versa

Types

1)   ECS (Credit):-used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment.

2)  ECS (Debit):-used for raising debits to a number of accounts of consumers/ account holders for crediting a particular institution.

Advantages

1)   Banks handling ECS get freed of paper handling. 

2) In ECS banks simply get the payment particulars relating to their customers. All they need to do is to match the account particulars like name, a/c number and credit the proceeds 

3)   Wherever the details do not match, they have to return it back, as per the procedure

ECS in India

1)   RBI has deregulated the service charges that could be levied by sponsor banks

2)   RBI has waived the processing charges levied by RBI and other banks managing the clearing houses till March 2008.

3)   operational at 15 RBI centers and at 45 other centers