ECS/NACH return charges: Meaning, penalties and how to avoid them

In the nation’s rapidly evolving and digitising financial landscape, automated payment systems such as Electronic Clearing Service (ECS) and National Automated Clearing House (NACH) have become extremely vital and indispensable for recurring payments for services along with other related transactions.

Still, in cases when these payments fail due to one reason or the other, customers are often hit with hefty return charges. Hence, in such a situation you should always keep these five essential points in mind to understand and know about ECS/NACH return charges better.

What are ECS/NACH return charges?

The ECS/NACH mandates permit banks and financial institutions to automatically debit funds from your account for regular payments such as EMIs on personal loans, utility bills, mutual fund SIPs along with other similar transactions.

Now in cases where such transactions fail, generally due to insufficient funds, technical glitches or incorrect details then a penalty is levied on the account holder. These charges are known as ECS/NACH return charges.

Charges imposed by banks for ECS/NACH failures

The applicable return charges vary widely between different banks and financial institutions. They are also unique to the type of account an individual holds along with the specifics of the financial institution. For example, Axis Bank charges ₹500 for first ECS return and ₹550 for subsequent ones.

Federal Bank on the other hand levies ₹250 for the first return and ₹500 for subsequent returns in savings accounts. Whereas for overdraft (OD) and cash credit (CC) accounts a fee of ₹350 is attracted for the first time and ₹750 for subsequent returns.

The State Bank of India and Bank of India both charge ₹250 per return, with GST added. Now these fees can quickly climb and add up if multiple transactions fail in a single month.

That is why as a well aware user of banking services while applying for a personal loan, credit card or any other related services it is your responsibility to be aware of several hidden charges imposed by banks.  

Common scenarios when ECS/NACH charges are levied

Do note, charges are imposed on account holders whenever an ECS/NACH transaction fails. Common reasons for these failures include insufficient funds, incorrect mandate details, technical errors. It is also important to acknowledge the fact that these charges are usually non refundable and are directly deducted from the account automatically.

On your part as an account holder hence, do take care of your balance and upcoming transactions. So that you never miss out on any payments or none of your pending transactions are withheld or rejected due to insufficient funds, incorrect mandates etc.

Financial impact of repeated ECS/NACH transaction failures

Given each charge may seem small individually still, multiple failed transactions can result in significant penalties. For example, if four SIPs of ₹500 each fail due to insufficient balance, then the total return charges can reach as much as ₹2360 after taxes.

This figure is far exceeding the original investment amount in some cases. This can easily disrupt financial plans, long term wealth creation strategies and even strain your budget.

Effective ways to avoid ECS/NACH return charges

• Maintain sufficient balance in your account at least a day before any scheduled debit to prevent failed transactions.
• Track your payment schedules regularly so you’re aware of upcoming ECS/NACH debits and avoid last-minute surprises.
• Update mandate details promptly if you change your bank account, contact info, or switch to a new service provider.
• Set up alerts and reminders through SMS or mobile banking to stay notified about low balances or due payments.
• Cancel inactive mandates by visiting your bank and submitting a written request, especially for services you no longer use.

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