What is NACH? What are its benefits, especially considering mutual funds?

It is the National Automated Clearing House, which means it is a centralized electronic payment service for banks, corporates, financial institutions, and the Government. It was set up by the National Payment Corporation of India (NPCI) to introduce best practices in electronic transactions. It is capable of facilitating high volume electronic transactions without any geographical barriers within the country.

Objectives:

• Improving governance by linking AADHAR to Institution Identification Number (IIN) and the introduction of the mandate management system.

• Implementing a system of having pan India coverage to process all electronic payments.

• Efficiency in handling debts, credits, reversals, rejections, and refunds.

• Direct Corporate Access for preferred users.

The most important benefit of NACH has been to mutual fund investors. Registration on NACH is a one-time process. The bank account is automatically linked to the mandate using the mutual fund folio. SIP registration through NACH is pretty easy. If you have already registered your bank with NACH, the one-time registration process takes place smoothly with much less paperwork. 

Thus, NACH has restructured the electronic processing of the transaction and has facilitated efficient and faster transactions for both users and service providers.