Electronic Clearing Service (ECS)
The ECS system is available in 88 cities. Membership in the ECS is automatically extended to all members of the cheque clearing systems, provided ECS is available in that centre. As in the case of cheques, ECS transactions are settled locally in the current accounts maintained with the bank managing the clearing house. The two ECS sub-systems are governed by the Clearing House Regulations and Rules and the Procedural Guidelines for each of the systems. These are enforced by way of contracts between the participating banks and the bank managing the clearing house. Settlement takes place locally in the accounts maintained with the settlement bank. NECS was implemented to fill in the coverage gaps left by ECS; the system covers the whole of India, exploiting the IT infrastructure of member banks.
ECS Credit
ECS Credit is used for the payment of salaries, pensions, dividends, interest etc. Payers submit credit instructions through their banks (sponsor banks). On the settlement date, the account of each sponsor bank is debited and the accounts of beneficiary banks are credited. Credit instructions are sent to the beneficiary banks in advance so that instructions can be returned if, for any reason, the beneficiary bank is unable to credit the recipient customer’s account.
Settlement for ECS is on T+1 basis. The entity making the payment submits the payment instruction through its sponsor bank. On day T the instructions are processed at the clearing house and passed on to the beneficiary bank. If the beneficiary bank cannot credit the customer for any reason, the instructions must be returned. A separate return clearing is held and final settlement is completed on T+1.
Settlement takes place in the books of accounts of the settlement bank.
The volume of ECS transactions increased from 88.4 million during the year to March 2009 to 98.1 million transactions during the year to March 2010, and from INR 974.9 billion to INR 1,176.1 billion respectively in terms of value.
National Electronic Clearing Service (NECS)
NECS was implemented in September 2008 to fill the gaps in ECS coverage. NECS (Credit) facilitates multiple credits to beneficiary accounts in destination branches across the country, against a single debit of the account of a user at the sponsor bank. The system covers the whole country, making use of the core banking solutions (CBS) of member banks. This enables all CBS bank branches to participate in the system, irrespective of their location. In the new set-up, users prepare a single consolidated NECS file and submit it to the central clearing house in Mumbai through their sponsor banks. The files can be uploaded by sponsor banks until the cut-off time one day prior to the settlement day, thus reducing processing time. Settlement is postponed to the next working day for files uploaded after the cut-off time. Returns are also processed on the settlement day itself and thus on the third day users know the status of their transactions.
ECS Debit
This system is used for multiple debits culminating in a single credit. A utility company gives the debit instructions (based on mandates given by its customers) to the sponsor bank, which in turn presents them to the clearing house for further processing. On the settlement date, the customers’ accounts are debited and the sponsor banks’ accounts are credited. The clearing and settlement procedure is the same as in ECS (Credit). India 186 CPSS – Red Book – 2011 ECS Debit transactions declined from 160.0 million transactions during the year to March 2009 to 149.3 million transactions during the year to March 2010. However, the value increased from INR 669.8 billion to INR 695.2 billion during this period.