AMFI has communicated to distributors that from May 1, only National Automated Clearing House (NACH) mandate forms would be accepted. The new system will replace ECS forms.
NACH was supposed to the implemented from March 1 but National Payments Corporation of India (NPCI) at the behest of AMFI extended this deadline to May 1. NPCI is an umbrella organization for all retail payments system in India.
Taking into account the lead time required for NACH process, AMFI has asked distributors to use only NACH forms from April 20 for registering new SIP mandates. Distributors can collect NACH forms either from AMC offices or their websites. For new SIP registrations, ECS forms will be rejected after April 20.
Existing ECS mandates would continue to be operative till the validity of the mandate.
AMFI has said that the current SIP registration process would remain the same. Instead of ECS forms, distributors will now have to collect NACH forms from clients. NACH does not replace existing direct debit arrangements some AMCs may have with clients, clarified AMFI.
As of now, registering a SIP through ECS mandate takes up to 30-35 days. 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.
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.
