ACH Mandate: Types, Benefits, and How It Works

The full form of ACH Mandate is Automated Clearing House Mandate. An account holder authorises their bank to make automatic, recurring payments from their account. This process operates under the National Automated Clearing House (NACH) system, streamlining transactions like EMIs, subscription fees, utility bills, and more.

 

An ACH Mandate ensures seamless, paperless payments without manual intervention. This mandate can only be registered by the individual or entity initiating payments (payer) and is applicable for both ACH credit and ACH debit transactions.

An Automated Clearing House (ACH) transaction involves the transfer of funds between two bank accounts. One account initiates the transaction (payer), while the recipient’s bank account reflects the credit. These transfers can be for payments like EMIs, salary deposits, or tax refunds.

 

Unlike traditional payment methods, ACH transfers are faster, cost-effective, and secure. Some banks may impose ACH-related fees, but this varies across financial institutions. Typically, direct deposits (like salary credits) do not attract fees, while certain direct payments might have a nominal charge.

An ACH mandate can be broadly classified into two main types based on the nature of the payment process. Here’s a breakdown of each type:

Fixed ACH Mandate

A fixed ACH mandate is used for recurring payments where the payment amount remains constant over a specified period. This type of mandate is ideal for loan EMIs, rent payments, and subscription fees. The bank debits a fixed amount on the due date, and the payer knows the exact amount in advance.

Variable ACH Mandate

A variable ACH mandate is used for payments where the amount varies for each transaction. People commonly use it for credit card payments, utility bills, and usage-based subscription fees. The payer authorises the payee to debit the required amount from their bank account, but the actual amount may change each month based on usage or outstanding dues.

The purpose of an ACH transfer depends on the type of transaction — ACH Credit or ACH Debit.

ACH Direct Payments

ACH direct payments are outgoing payments made by an individual or business. You can use them for:

• EMI payments

• Tax payments

• Subscription fees

• Utility bills

• Mortgage payments

• Recurring investments

• Tuition fees

• Insurance premiums

ACH Direct Deposits

ACH direct deposits are incoming payments received by an individual or entity. They are often used for:

• Salary payments (payroll)

• Pension payments

• Tax refunds

• Dividend payouts

• Loan disbursements

• Expense reimbursements

• Interest payments

Most banks in India provide the ACH facility under NACH. Here are some major banks offering the service:

• HDFC Bank

• Axis Bank

• State Bank of India (SBI)

• ICICI Bank

• Bank of Baroda (BoB)

• RBL Bank

 

To register for an ACH mandate, you can either collect the form from the bank or download it from the bank's official website. Submit the filled form along with required documents like a cancelled cheque and identity proof.

You can register an ACH mandate using two methods:

• Through your bank

• Through the NSE Mutual Fund platform

Registration of ACH Mandate Via Banks

Follow these steps to register your ACH mandate through a bank:

1. Visit your bank’s net banking portal or mobile app

2. Log in using your credentials (ID and password)

3. Select 'ACH Mandate Registration' or ‘NACH Mandate’

4. Enter key details like bank account number, MICR code, IFSC code, and payment instructions

5. Verify your mobile number and authenticate the process via OTP

6. Submit the form and track the status via the banking portal

Registration of ACH Mandate Through NSE

Here’s how to register for an ACH mandate through NSE:

1. Visit the NSE Mutual Funds website and click on 'CRM'.

2. Select 'ACH Mandate Registration' from the available options.

3. Enter your Investor Identification Number (IIN) or Customer ID.

4. Select 'New' as the mandate type when asked for the UMRN (Unique Mandate Reference Number).

5. Choose 'e-Mandate' and set the mandate type to 'Online'.

6. Ensure your bank supports e-mandate services and is registered at the IIN level.

7. Click on 'Submit' to confirm your e-Mandate registration.

8. Enter your Aadhaar number for identification.

9. Receive an OTP on your registered mobile number.

10. Enter the OTP to authenticate and complete the registration process.

 

Note: The steps may differ slightly depending on the bank's or platform's requirements. It’s best to follow the instructions provided on the official website.

To set up an ACH mandate, you need to fill in the following details on the ACH form:

• Bank account number

• MICR code

• IFSC code

• Bank name

• Type of transaction (credit/debit)

• Amount (in figures and words)

• Phone number

• Email ID

 

Once submitted, the form is processed, and your payments are automated.

ACH transfers are usually free, but some banks may charge fees. These fees are often related to payment types and the institution's policies. Common ACH fees include:

• Debit fee – When funds are debited from your bank account

• Credit fee – The bank credits funds to your account, applying a credit fee for the transaction

• Service fee – A general charge for processing the transaction 

 

It’s best to check with your bank about any applicable ACH fees.

Many confuse ACH with ECS (Electronic Clearing Service). Here’s a simple comparison:

Now that you know the meaning of the ACH mandate, understand the two types of ACH transfers:

ACH Credit

An ACH Credit is a transaction where the payer transfers funds directly from their bank account to a recipient's account. For instance, if you schedule a utility bill payment through your bank's mobile app, the bank sends money from your account to the utility company’s bank account. People often use it for payments like rent, credit card bills, and school fees.

ACH Debit

An ACH Debit allows the recipient (like a lender or service provider) to automatically pull funds from the payer's bank account on a set schedule. For example, if you set up EMI auto-debit for a personal loan, the lender deducts the EMI directly from your bank account on a fixed date each month. People also use it for subscription payments and loan repayments.