ACH Mandate

The full form of the ACH mandate is Automated Clearing House mandate. It is an instruction authorising the bank to carry out the transactions. ACH transfers operate under NACH, and the mandate helps make the process seamless. 

You can set up an ACH mandate for recurring payments like EMIs or credit card bills. You have to complete a registration process to set up this mandate. Only the person initiating the transfer, i.e., the one who is paying can register for the mandate.

An Automated Clearing House (ACH) transaction takes place between two banks. One, from where the debit transaction originates, and the second, with the receiving bank where the credit entry of the same reflects. 

 

To successfully complete your transaction, some banks may levy ACH charges. This means that a fee may be involved, but not all banks levy these charges. Thus, the ACH transaction is an electronic transfer that takes place when you place a request with your bank. 

 

Only the individual or entity making the payment can initiate it, i.e., someone who wants to transfer and does not receive funds. However, not all ACH transactions are charged. For instance, ACH deposits do not attract charges, whereas direct payments may have nominal charges.

 

Depending on the type of ACH transfer, the objectives vary. 

1. You can use ACH direct payments in the following cases:

• Payment of taxes

• Payment of EMIs

• Subscriptions

• Gifts and donations that are recurring

• Tuition fee

• Mortgage loan payments

• Membership fees

• Recurring investments

2. You can use ACH direct deposit in the following scenarios:

• Payroll

• Pension

• Annuities

• Refund of taxes

• Dividend payments

• Interest payments

• Expense reimbursements

Several banks provide ACH facilities, some of which include:

• Axis Bank

• Bank of Baroda

• Bank of India

• RBL Bank

• HDFC Bank

• State Bank of India (SBI)

 

Simply visit the bank to get the form physically or go to the bank’s website to download the ACH form. Get the form and fill in the required details accurately. Once you fill in all of these details, submit the form to complete the registration process.

The ACH form helps easily execute transactions through ACH and ensures that the funds are directly credited to or debited from the bank account. A few important details have to be filled in the ACH form, such as:

• MICR number

• IFSC code

• Bank account number

• Phone number

• Email ID

• Transaction type (debit or credit)

• Amount in figures and words

• Bank name

 

Once you fill in all the required details and submit the form, the funds will be directly transferred into your bank account.

ACH mandate charges are essentially fees that certain banks and financial institutions levy. Typically, ACH transfers do not incur charges as much like other modes of transfer. However, certain banks charge transaction fees or service fees. 

 

The ACH charges that are typically levied: 

• Credit fee

• Debit fee

• Discount fee

• Account fee

 

As these charges depend on the financial institution, it is best to verify these with the bank.

ACH is different from ECS, or Electronic Clearing Service, in the following ways:

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

1. ACH Credit

In this type of money transfer, money is transferred from the payer’s bank account to the receiver’s bank account. Under ACH credit transactions, the money is transferred into the account. 

 

For example, you set up a payment through your bank to pay a bill.

2. ACH Debit

Through this facility, money is withdrawn from the bank account. In this transfer, the payer grants the receiver authorisation to collect payment from their account, as per predetermined frequency for a predetermined duration. Under ACH debit, the money is deducted from the account. 

 

For example, you set up a recurring monthly payment for your EMI through the auto-debit option.