In an email sent to distributors, AMFI Unit of CAMS has requested mutual fund distributors to ask new investors to submit National Automated Clearing House (NACH) form which will replace Electronic Clearing Services (ECS) form to invest in mutual funds through SIPs. This comes into effect immediately.
The email says that banks may not accept ECS mandate forms from new investors for SIP registration.
Earlier this month, National Payments Corporation of India (NPCI) said that ECS which is used for servicing mutual fund SIPs will soon be replaced by NACH forms. This was supposed to be implemented from March 1, 2016.
As of now, registering a SIP through ECS mandate takes up to 30-35 days and there is no way to track if the ECS has been confirmed at the bank’s end. However, most banks, especially private sector banks issue mandates within 15-20 days. With 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. Also, NACH is cost effective as compared to ECS as it entails less paperwork.
While new investors are required to submit NACH forms to invest in mutual funds through SIP, ECS mandate of existing investors will automatically be migrated on NACH platform, clarified the CAMS email. That means, distributors need not collect NACH form from existing investors even if their SIP expires. Also, NACH on its own does not replace existing direct debit arrangements.
NACH can help investors and distributors in a big way. Earlier, distributors had to register multiple mandates if their clients wanted to invest through SIP in say, four different schemes. With the new system, distributors can register four SIPs through one mandate. The process has become simpler even in case of lump sum investments. NACH can be also utilized to pay utility bills and insurance premiums.
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.
