1. The Scheme shall be called 'Electronic Clearing Service (Credit Clearing)' and will be referred to as ECS (Credit) herein after.

2. At present the scheme is in operation at 15 RBI centers (where Clearing Houses are managed by Reserve Bank of India) and other centres managed by various Public Sector Banks managing the clearing houses. The list of centers managed by RBI and other banks is given in Annexure. The Annexure will be updated as and when Scheme is extended to other centres.

3. The objective is to provide an alternative method of effecting bulk payment transactions which would obviate the need for issuing and handling paper instruments and thereby improve payment efficiency and also facilitate better customer service by the banks and Companies/Corporations/Government Departments effecting the payments.

4. i) User - ';User shall refer to the companies/corporations/Government Departments or any other institutions effecting bulk payments to a large number of beneficiaries, under the scheme.

ii) Sponsor Bank - It would refer to the bank which would act as the agent of the User to submit the magnetic tape/floppy containing payment instructions prepared by the User to the National Clearing Cell (NCC) / Clearing House (CH) and which would give a mandate to Reserve Bank of India (to be referred to as RBI herein after)/ Clearing Agency designated by RBI to debit its account.

iii) National Clearing Cell (NCC) / Clearing House (CH) - It would be a functional unit of the local Bankers' Clearing House or such other agency to be created by RBI which shall process the payment instructions received on magnetic media (Tape/Floppy/CD/Pen drive/web server) from the Sponsor Bank and generate relevant clearing reports for settlement of accounts of banks at RBI. The institutional arrangements made by RBI shall be final.

iv) Destination Account Holder would refer to the beneficiaries under the Scheme who would opt to receiving payments from the User directly by way of credit to their bank accounts.

v) Destination Bank Branches would refer to the bank branches where the Destination Account Holders maintain their bank accounts into which ECS payments are credited.

5. The scheme shall cover transactions of the following characteristics:

i) Bulk payment transaction like periodic (monthly/ quarterly/ half-yearly/ yearly) payments of interest/ salary/ pension/ commission/ dividend/ refund by companies
/corporations /government departments and such other organisations defined as ';User';

ii) The transactions to move from a single User source to a large number of Destination Account Holders.

iii) The credit transactions should pertain to the various Destination Bank Branches which fall under the jurisdiction of the local Bankers' Clearing House.

iv) The credit instructions from the User to the Destination Account Holders would be on media (tape/floppy/CD/pen drive) (a form of electronic media that can be processed on computers) and would form the basis for the Sponsor Bank to debit the User's account and the Destination Bank branches to credit the beneficiaries' Accounts. Such information could also be uploaded to the specified web-site by the service branch of the sponsor bank on the web-server, if such a facility exists at the Clearing House.

v) Individual credit item without any ceiling on the amount or as specified by the User and

vi) Such other payment transactions involving a single debit to a User's account at one bank and multiple credits to a large number of beneficiaries at many banks to be specified by NCC / CH after ascertaining the level of infrastructure available at the Service/Main branches of member banks.

6. NCC / CH would be responsible for processing the input data submitted by the Sponsor Bank on behalf of its User and supply of relevant clearing reports to the Sponsor Bank, Destination Banks and Deposit Accounts Department of RBI/Clearing Agency for accounting of the Clearing Settlements. It would monitor the performance of all the constituents in ECS Clearing to ensure that the time schedule for various activities under ECS Process Cycle as explained at Appendix -I are adhered to.

7. NCC / CH will have a Steering Committee comprising not more than 10 and not less than 5 member banks to aid and advise it on operational issues. The Committee shall be constituted by the NCC / CH and its term shall be one year. The Committee shall meet at least once in a quarter.

8. RBI/Clearing Agency designated by RBI shall provide the settlement service by way of crediting/debiting the accounts of Destination Banks and the Sponsor Bank in the books of the Settlement bank on the basis of settlement figures advised by the NCC / CH. Normally such settlements, in centres where there are RBI offices, shall take place in the books of accounts of RBI. The settlement rules for clearing pertaining to minimum balance and withdrawal of favourable balance in clearing as explained in the Uniform Regulations and Rules for Clearing Houses would also be applicable to the settlements under ECS.

9. Institutions who would like to avail of the ECS facility shall get themselves registered with the NCC / CH. The application in form E-1 (Appendix IV) will be submitted by the User institution to their Sponsor Bank. The Sponsor Bank will forward the application form to the NCC / CH with their recommendations for registration and allotment of User Number. The User Number allotted by NCC / CH will be communicated to the User institution through the Sponsor Bank. The registration number will be of 7 digits - the first 3 digits will be the Pin Code of the centre of the NCC / CH (e.g. Mumbai - 400, Kolkatta -700), the next digit will represent the type of transaction (viz. dividend, interest, salary, etc.) being put through and last 3 digits being the User number allotted to the User institution. The users registered at one centre and allotted a user number may use the same user number at all other centres.

10. Input file should be as per the record layout in a standard format, to be specified by RBI from time to time. The mode of submission of the input data has to be as specified in para .5(iv). of these guidelines.(Guidelines for Input Preparation and Input Submission at Appendix - II).

11. The User would ensure the accuracy of the input data with reference to the information received from Destination Account Holders. Sponsor Bank may obtain an undertaking from the User in this regard before forwarding the magnetic media to NCC / CH.

12. NCC / CH would be receiving the input data from the Sponsor Bank. To prevent possible attempts for fraudulent change of data in transit, the NCC / CH will receive the input files in a sealed cover on magnetic media duly encrypted in consultation with the NCC / CH. The Sponsor Bank shall not make any changes in the input data received from the User without obtaining consent from the User.

13. Input submission would have two stages - Test Submission (for validation process) and Settlement Submission (for final settlement of accounts). Test submission is required to verify whether input preparation has been made as per standards prescribed by RBI and also to give reasonable opportunity to the User to repair the data before working out the clearing settlement. NCC / CH would validate this Test input as per validation routine explained at paragraph 15 to 25 and furnish a report called ';Data Validation Report'; (DVR) along with the validated tape/floppy. This report would contain the list of rejected Credit Records and the revised particulars of total number and amount in the CREDIT CONTRA Record. The User has to verify the validation exercise carried out at NCC / CH and decide as to whether to confirm the validations and resubmit the tape/floppy for settlement process or opt for editing/repairing the input file. If the rejected records are many, it would be advisable to repair the data records and submit the same as a fresh Test Input.

14. Sponsor Bank's request for centralised receipt of User's data meant for settlement at more than one ECS centres with NCC / CH taking the responsibility of transmission of data would be considered if the volume for each centre is substantially high and the data tapes are submitted centre-wise. Such users have to ensure that the data is submitted only at NCC, NPt, Mumbai. NCC, NPt, would validate the data and furnish separate Data Validation Reports for each centre. Once the Data Validation Report is confirmed by the Sponsor Bank, NCC NPt will transmit the same to NCC / CH at the destination centres for settlement processing. The Sponsor Bank's account will be debited at Mumbai.

15. All files received duly encrypted would be subjected to an initial level of validation to determine whether the file can be accepted or not. It shall be checked with reference to the Use name, User number (to be allotted by NCC CH), Sponsor Bank Branch sort code and other user defined parameters.

16. User details (sort-codes, User number and User name) should be uniform on all data records in the file. The purpose of repeating the User information on all data records is to make each data record self-contained. Therefore, the credit record with the details different from the one recorded on the 'CREDIT CONTRA' record will be rejected.

17. The destination account details would have two parts - the destination sort code and the destination account number. The code number of the branch of the bank where the individual account holders i.e. beneficiaries maintain their accounts and to which the credit would be applied is the destination sort code. ECS validation routine checks whether the code indicated in the data record is a valid MICR sort code listed in the compendium of Code Numbers.

18. In the absence of a specific request from Sponsor Bank records with outstation destination sort codes would be rejected.

19. The account number particulars are an essential field in the data record. Account number will have a maximum length of 15 digits as indicated at item 5 under 'Credit Records' in appendix - II. Records with no information on the account number field would be rejected.

20. There will be no outer limit for individual credit record. The particulars of the User defined limit should be indicated by the Sponsor Bank in its mandate as an additional parameter for validation.

21. The decision for rejection of a file/record would depend on the following :-

Files: 1.Defects in the magnetic media

2. CREDIT CONTRA records (ECS transaction code) missing or the value indicated in the CREDIT CONTRA record exceeding the value given in the Sponsor Bank's mandate to RBI to debit its account.

3. Invalid Sponsor Bank sort code, or incorrect User number and User name details in the CREDIT CONTRA record.

Record: 1. Absent or invalid destination sort code

2. Absence of account number or account name

22. More than one credit transaction against the same credit reference (i.e. ledger folio number or share/debenture certificate No. or any other unique identifying number for the beneficiary as indicated at item 10 under 'User credit reference' (in Appendix II) would not be permitted. User shall take due care about this before presenting the input file and ensure that the 'User credit reference' is not repeated in any other credit record in the input file.

23. The credit records without the ledger number/ledger folio number of the account of the beneficiaries at the Destination Bank branches would not be rejected, because at some branches the account numbers can uniquely identify the accounts irrespective of whether the Ledger number/Ledger Folio number is given or not. In the clearing reports for Destination Bank branches, these accounts would, however, be shown against the 'Miscellaneous Ledger'.

24. When an input file passes in the ECS File Acceptance/validation checks, NCC / CH will provide an advice of acceptance or otherwise to the Sponsor Bank. This would be done through a Data Validation Report (DVR) {Format at Appendix - IX} along with the validated tape/floppy. The DVR would indicate the details of errors encountered during validation process and total number and value of records accepted from the file. If the total value of accepted credit records generated during the validation process are different from the ones indicated in the balancing debit record (i.e. the CREDIT CONTRA Record). CREDIT CONTRA Record would be modified and the fact of this modification in the input file would be indicated in the DVR.

25. The Sponsor Bank would arrange to get the DVR and the Validated tape/floppy verified by the User. Field number 13 of 10 digits in the Credit records would have contained coded information representing the checksum of the record so as to detect modification, if any, made in the file subsequent to validation process at NCC / CH. Besides, to facilitate easy identification of rejected credit records, NCC / CH would have changed the transaction code to 33 and the item Sequence Number field filled with '9999999999'. The User would have to take into account these records while confirming the DVR or deciding to edit/repair the input file for resubmission. If the records are edited/repaired, the cycle of Test Submission and Data Validation would be restarted.

26. In case, however, the rejected records are only a few in numbers, and the DVR is confirmed by the Sponsor Bank by way of resubmission of the validated tape/floppy duly encrypted, ECS Process cycle would commence. The encrypted tape/floppy should be accompanied by a mandate from the Sponsor Bank for debiting its account at the Deposit Accounts Department of RBI/Clearing Agency. The mandate should be signed by an official of the Sponsor Bank having authority to operate the Bank's account with RBI. This day of submission of validated and encrypted tape/floppy with a mandate would be taken as the first day of the ECS Cycle.

27. Once the DVR is confirmed by the Sponsor Bank and the settlement process begins at NCC / CH, withdrawal/modification of file/record shall not be permitted except when, in the opinion of RBI, the transaction cannot be settled on the due date by the banks.

28. On Day- 0 NCC / CH would generate the following output data only in magnetic media (tape / floppy / web server). The description of the magnetic media, the record lay out of the output file and also the naming convention for the output file are given at Appendix III.

i. Destination Bank Settlement Report (format at Appendix -XI)
ii. Destination Branch Report (format at Appendix - XII)
iii. Destination Ledger Reports (format at Appendix - XIII)

(For accounts with no ledger folio number a 'Miscellaneous Ledger Report' would be generated under each account type).

In addition, NCC / CH would also generate two hard copies of the ECS Control Report (Format in Appendix -X) bank wise. The output data as indicated above would be delivered to the Destination Bank on magnetic media (floppy/tape) duly encrypted subject to all safeguards, relating to accuracy and authenticity.

29. These tapes/floppies along with a hard copy of the ECS Control Report (Appendix - X) will be delivered to the Service/Main branches of Destination Banks on Day-0. The Service/Main branch of Destination Banks would be responsible for the loss/misuse of the tape or floppy after they receive the same from the NCC / CH. The Service branches of Destination Banks should make their internal arrangements immediately on receipt of the tapes/floppy to generate hard copy of the clearing reports and send to their concerned branches the Destination branch Reports and Destination Ledger Reports mentioned above on the same/following day so that the Destination Account Holder's accounts are credited on day-1 (i.e. settlement date mentioned in the report) without fail. On the day of settlement (2nd day of ECS cycle) NCC / CH would debit the Sponsor Bank's account with the amount indicated in the mandate given by the latter (Appendix - V) and credit the accounts of the Destination Banks with amounts due to them. Destination Bank would be held liable to pay penal interest at the rate of prevailing Bank Rate plus two percent from the due date of credit till the date of actual credit for any delayed credit to the beneficiaries' accounts. Penal interest, if any, may be credited to the Destination Account Holder's account even if no claim is lodged by the Destination Account Holder.

30. On Day-0 Sponsor Bank will also be supplied by the NCC / CH with two copies of the User-wise Settlement Report (format at Appendix -XIV) which would indicate the volume and value of transactions for which Destination Banks would be credited and the amount for which Sponsor Bank would be debited. One copy of the report would be forwarded by the Sponsor Bank to the User. The reports would be signed and authenticated by the NCC / CH and would act as the evidence of credits having flowed from the Sponsor Bank to the Destination Banks for a specific number of credit transactions on behalf of a specific User. It would be User's responsibility to verify the accuracy of the Report with reference to the input data and the DVR wherein the particulars of the rejected records would have been already indicated. Discrepancy, if any, in the summary data should be brought to the notice of NCC / CH immediately.

31. If a Destination Bank branch is not in a position to credit a particular transaction for reasons like ';Account closed/transferred';, ';No such Accounts';, ';Account description does not tally';, etc., it should report the same with a Return Memo (format at Appendix - VI). The same would be forwarded to its Service Branch/Main Branch on day-2. On receipt of the un-credited items from all the concerned branches, the Service branch of the Destination Bank would flag off or mark off the relevant credit items in the tape or floppy as unpaid, by means of a code '0'and all other items by means of a code '1' in the blank column provided at field No.14 of the credit record. The responsibility for ensuring accuracy in incorporating the above information in the tape or floppy lies with the Destination Banks. After incorporating the information relating to credited/un-credited items, the tape or floppy would be returned to the NCC / CH on the same day (i.e. Day-2). The floppy diskette should be accompanied by a hard copy output of the input file duly signed by the Destination Bank. The Return Memos prepared at the branch level may also be forwarded to NCC / CH for onward transmission to the Sponsor Bank/User. Branches should not send any payment order etc. to NCC / CH or to the Sponsor Bank for the items reported under this procedure. Adjustment of the excess credit received by the Destination Bank Branches will be effected through a clearing settlement on the basis of data of un-credited items reported through floppy. The NCC / CH would generate the reports on Day-2 evening presuming that the concerned bank has afforded credit to all the beneficiaries and there are no un-credited items.

32. On receipt of return data input from the Destination Banks, NCC / CH would reprocess the ECS transaction processed earlier by way of modifying the transaction codes of the un-credited records to ';44'; from ';22';. The Checksum Total of the relative records would undergo corresponding changes with the software used at NCC / CH. Any change in the data file thereafter would result in erroneous data codes which can be easily noticed by a validation routine run by NCC / CH.

33. After reprocessing the ECS transaction, NCC / CH shall work out a clearing settlement whereby the Destination Banks' accounts would be debited and the Sponsor Bank's account credited. Settlement of account would take place on day-1. On the same day, NCC / CH shall provide the following.

- Combined List of Un-credited items (a consolidated list of all un-credited items reported by all Destination Bank to be given to Sponsor Bank){format at Appendix -XV).

- Output Tape (two copies) -a report on electronic media containing the details of all transactions [valid, rejected and returned un-credited - all items to be suitably flagged/marked off] to be given to Sponsor Bank for verifying the correctness of the clearing data and for passing on one copy thereof to the User for necessary action.

- Sponsor Bank Final Report - a report showing the amount originally debited subsequently credited as un-credited items and the final amount debited for ECS Credit Clearing (format at Appendix -XVI).

- Destination Bank Final Report - Destination Bank-wise summary report showing branch-wise initial credit as subsequent debit (format at Appendix - XVII).

34. The Checksum Total value in the Output Tape would be generated by NCC / CH in such a way that any subsequent correction on the Output Tape by any unauthorised person would throw an error message during subsequent processing.

Late submission of tape or floppy after day-3

35. If any Destination Bank fails to submit the tape or floppy to the NCC / CH on day-2, the bank should submit the list of un-credited items over the counter of the Sponsor Bank Branch at the earliest (Positively by Day -3) as such delayed reporting cannot be incorporated by NCC / CH in the Output Tape and also cannot be included in the clearing settlement for un-credited items. Payment settlement for such items would have to be worked out between the Sponsor Bank and the Destination Bank concerned. The undue delay of the Destination Bank to submit the counter return beyond Day-3 would attract penal action. The President of the Clearing House may take such action / decide penalty against the bank as he deems fit.

36. The credit received by the Sponsor Bank against the un-credited items through the Un-credited items Clearing shall be passed on to the User's account on the day Sponsor Bank's account would be credited by RBI.

38. It would be the responsibility of the User to advise the Destination Account Holders of the ECS credit. Immediately after the receipt of the output Tape, the User would issue Payment Advices to the Destination Account Holders indicating the particulars of payment and the date on which payment has taken place. Care need be taken by the User to ensure that Payment Advices are sent only for these items (transaction code 22) which could finally be credited to Destination Account Holders' accounts. Rejected items (transaction code 33) and Un-credited items (transaction 44) should be pursued by the User. The Destination Account Holders whose accounts could not be credited should also be advised by the User with reasons therefor and payments arranged through alternative means at the earliest.

39. If a User makes use of the ECS mechanism for making payments to the same set of beneficiaries every quarter/month or at more frequent intervals, and there is no likelihood of any credit item being returned un-credited, an advance one-time intimation can be issued on yearly basis indicating the date on which ECS settlement would take place. This would replace issuance of payment advice on every occasion. This procedure is most suitable for monthly/quarterly interest payments of companies/corporations where the modifications inn the data file are minimum and likelihood of returns is almost 'nil'.

40. On advising the Destination Account Holders, the responsibility of the Destination Bank branches would be limited to explaining the source of credit when called upon by the Account holders to do so. The entry in the Statement of Account/Pass Book should be clear enough to indicate that the transaction in question was through ECS (ECS credits may be referred to as 'ecs' in the pass book entry and would be posted item-wise). The Destination Bank would not be liable to issue separate advice to the Account Holders. If the Sponsor Bank/User wishes to send the payment advice though the Destination Bank branches, a separate arrangement outside the ECS framework would have to be worked out.

41. When the User invites option from the Destination Account Holders, the User should inform the Destination Account Holders, in a readily understandable written statement that the proposed mode of receiving the payment is purely voluntary and the Destination Account Holder would have the right to withdraw after giving an advance notice (Specimen at Appendix VII).

42. While exercising the option to receive payment through ECS, Destination Account Holder shall furnish the particulars of his/her i) Account Number, ii) Ledger No./Ledger Folio Number, iii) Account Type (i.e. S.B. Account or Current Account) and iv) Bank and branch names with the sort-codes. The sort-code (i.e. city-bank-branch code) information would be available by seeing the MICR code line of the cheque book issued by his/her banker. The form on which the information would be furnished by the Destination Account Holders would be clear and free of ambiguities. The particulars at Sr.Nos. (i) to (iv) mentioned above shall be got certified by the beneficiary from the bank branch where he/she is maintaining the account. The banks may, at their discretion decide and charge a fee from the beneficiaries for this service. In lieu of the bank certificate as stated above, the beneficiary can also enclose with his/her mandate, a photocopy of the cheque or front page of his saving bank pass book for verification of his/her account particulars by the User. A model letter form a prospective User to a customer/investor is given at Appendix - VII and a model Mandate Form given at Appendix - VIII. The User may use formats of their choice provided the materials contained in the Model Letter/Model Mandate form are included. In case a User has already got the bank branch account type ledger no. and account number etc., particulars duly certified by the bank branch of the beneficiary, the same could be utilised for making remittances through bank accounts under ECS, only after informing the beneficiaries.

43. Information furnished by a beneficiary to the User shall not be utilised by the User for purposes other than transfer of funds through ECS without the consent of the beneficiaries. This should be indicated by the User while inviting options from the beneficiaries.

44. There would not be any stipulation on the minimum number of transactions to be put through. But considering that the Scheme is designed for bulk transactions, NCC / CH may combine the settlements of more than one input submissions on a single day. Therefore, a Sponsor Bank should finalise the settlement date in consultation with the NCC / CH.

45. The service charges to be levied by the Sponsor Bank would be decided mutually by the User Institution and Sponsor Bank. There will be no processing charges levied by NCC/Clearing House up to March 31, 2007. The same would be reviewed periodically. The Reserve Bank of India may, if it so desires in future, decide to levy any other charge/fee on the Sponsor Bank/Destination Bank as also the quantum thereof.

46. No service charge would be levied for test presentations. ';Test Presentations'; would refer to those which would not be subjected to settlement operation and would be carried out only to verify whether input preparation and submission procedures are correct. One submission with dummy data made by the User at the time of registration (if desired by the User or the NCC / CH) would be free of service charge.

47. The Sponsor Bank may pass on the liability of service charge to the User on the settlement date.

48. ECS is primarily designed for high volume transactions. NCCs / Clearing Houses, however, have the discretion of accepting the lower volume of ECS transactions.

49. Destination Banks would not claim service charge for passing on the credit to the Destination Account Holders' accounts.

50. The Procedural Guidelines can be amended only on the approval of RBI. The NCC / CH may forward their suggestions for amendment after a debate on the suggestions at the Steering Committee level. RBI may also, by issuance of a circular, amend the procedure.