Electronic Clearing Service (ECS) is a method of electronically transferring funds between bank accounts. It is used for bulk transfers of funds that are repetitive and periodic in nature, such as bank transfer of salaries, dividends, interest payments, loan repayments, and pensions, among others. ECS is generally used by large organizations for repetitive bulk transactions. The Electronic Clearing System can also be used to settle utility bills and other regular payments, such as equated monthly installments (EMIs) for loans and systematic investment plans (SIPs). ECS is classified into two types – ECS credit and ECS debit. ECS credit is used when a bank makes a credit to another bank account, such as to pay a salary or dividends. In this case, a single bank account is debited, and the money is credited to multiple other accounts. ECS debit is used for raising debits to a large number of accounts maintained with bank branches at various locations within the jurisdiction of an ECS Centre. ECS debit is useful for payment of telephone/electricity/water bills, cess/tax collections, loan installment repayments, periodic investments in mutual funds, etc., that are periodic or repetitive in nature and payable to the user institution.
To use ECS, the user intending to effect payments through ECS Credit has to submit details of the beneficiaries, such as name, bank/branch/account number of the beneficiary, MICR code of the destination bank branch, etc., in a specified format (called the input file) through its sponsor bank to one of the ECS Centres where it is registered as a User. The beneficiaries of the repetitive or regular payments can also require the paying institution to make ECS (credit) for payment. The clearing house would debit the account of the ECS user through the account of the sponsor bank on the appointed day and credit the accounts of the recipient banks, for affording onward credit to the accounts of the ultimate beneficiaries.
In summary, ECS is an electronic mode of payment/receipt for transactions that are repetitive and periodic in nature. It is used for bulk transfers of funds and is generally used by large organizations for repetitive bulk transactions. ECS is classified into two types – ECS credit and ECS debit. ECS credit is used for allowing credit to a large number of beneficiaries by raising a single debit to the customer’s account, such as dividend, interest, or salary payment. ECS debit is used for raising debits to a large number of accounts maintained with bank branches at various locations within the jurisdiction of an ECS Centre[[3]](https:...
