Tag: NACH

October bounce rates for auto-debit transactions at pre-Covid level

Banking & Finance

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Bounce rates for auto debit transactions touched pre-Covid levels in October this year indication lower stress amongst borrowers with the opening up of the economy.

The bounce rate or percentage of unsuccessful auto debit transactions in October 2021 was 31.2 per cent, according to data with the National Payments Corporation of India from the National Automated Clearing House (NACH).

This is the lowest level since January and February 2020 when the bounce rate was 31.04 per cent and 31.46 per cent respectively.

Overall, of the 8.65 crore auto debit transactions presented on the NACH platform in October, 5.95 crore or 68.8 per cent were successful while 31.2 per cent were returned.

NACH is a web based solution to enable interbank, high volume, electronic transactions which are repetitive and periodic in nature. Typically, auto debit transactions are for recurring payments such as EMIs and insurance premium although it does not capture intra-bank transactions.

The bounce rate for these transactions has been gradually coming down since July this year after it peaked to 36.5 per cent in June during the second wave of the pandemic and local State level lockdowns that hampered economic activity.

Significantly, the volume of auto debit transactions has also increased from just 7.77 crore in January last year, which declined to 6.4 crore in May 2020.

Most banks and NBFCs have reported improved collection efficiency, at pre-Covid level for many, in the second quarter results.

Earlier this month, Mahindra Finance reported that in October 2021, its collection efficiency was at about 91 per cent. While this was lower compared to the second quarter of the fiscal, it is ahead of October 2020 collection efficiency of 89 per cent, it had said.

Similarly, CreditAccess Grameen said collection efficiency excluding arrears improved to 93.3 per cent in the second quarter of the fiscal and further to 94.3 per cent in October.

“Market feedback and collection efficiency reported by a few lenders suggest normalisation kicking in with improvement in collection efficiency from mid-June once there was easing of restrictions and lockdowns,” said a report by ICICI Securities early last month.

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NPCI is estimating 25 million new mandate registrations for recurring payments by the end of fiscal

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The National Payments Corporation of India (NPCI) is estimating a run rate of 25 million new mandates for customers getting registered every month for recurring payments by the end of this fiscal. The federal fintech firm is also looking at a target of processing one billion UPI transactions per day over the next three years.

Speaking at The Global FinTech Fest 2021, Dilip Asbe, Managing Director and CEO, NPCI said, “Last year we had about 22 billion UPI transaction volumes and this year we are expecting that to touch 40-42 billion. And annually the value is over one trillion dollars. There is still a possibility of 10X growth in digital payments. We should process about 50 billion transactions on a monthly basis and one billion per day over the next three years. There is a lot to be done, we have just started.”

“While I would assess that we would touch the one billion mark by the next five years, given that the government and regulators are keen on growing digital payments ecosystem at scale, we should aspire to reach one billion transactions a day in three years,” Asbe added.

Rajan Anandan, Managing Director, Sequoia India & Surge, who was conducting the chat with Asbe added, “We should make a national mission to get UPI to a hundred countries. That would make world a better place and that will create a massive number of global Indian payments companies.”

Recurring Payments

One of the initiatives NPCI is actively working on is to make recurring payments safe and secure by adding two-factor authentication and creating the right mandate for the customers.

Also read: Auto debit norms: Payments Council of India seeks extension for smooth transition

“We call it a layer of ‘auto pay’ wherein NPCI’s three-four existing companies are fighting for a share in that space. We have an auto pay layer on UPI, Rupay, NACH and Bharat Bill Payment System. These systems will compete with each other to get the mandate share in the market. We have been receiving 2 million new mandates registrations from customers for auto pay on UPI every month. NACH is also getting around 2 million. Rupay and BBPS are just starting in a month or so,” Asbe said.

“We want to exit the financial year with a run rate of 25 million new mandate registrations per month. I strongly believe the regulator believes in long-term gains,” he added.

Need for MDR

According to Asbe, there needs to be reasonable charges for MDR. As the volumes are growing, as an ecosystem they must set up a path.

He said, “We need to make it more cost effective for the ecosystem. While the government has been trying to make digital payments accessible to smaller local merchants by making MDR zero during the demonetisation phase in good faith, we are constantly having conversations with all the ministries involved, asking to set a reasonable charge and thankfully the finance minister announced some incentives in the budget.”

“The 10x growth will come through investments in customer onboarding, spreading awareness and customer protection. The merchant base needs to grow from 50 million active merchants to 100 million. Everybody in that supply chain needs to make money, at least to fund their IT investments and banks have to create scalable CBS (core banking solutions) processes to allow huge volumes of UPI transactions. We are hoping the government will very soon make an announcement on this,” he added.

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Auto debit transactions: Bounce rates in August near pre-second wave levels

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Bounce rates for auto-debit transactions in August were at similar levels as March 2021 as businesses and borrowers shrugged off the impact of the second wave of the Covid-19 pandemic.

According to data from the National Payments Corporation of India from the National Automated Clearing House (NACH), the bounce rate or percentage of unsuccessful auto-debit transactions in August 2021 was 32.98 per cent.

This is the lowest since March 2021 when the bounce rate was 32.76 per cent. In all, a total of 8.76 crore auto-debit transactions were reported on the NACH platform in August, of which 5.87 crore were successful and 2.89 crore were returned or unsuccessful.

Also read: Resilient demand keeps driving India’s world-beating growth

Typically, auto-debit transactions are for recurring payments such as EMIs and insurance premiums although it does not capture intra-bank transactions. With the second wave of the pandemic leading to localised lockdowns and impacting economic activities, bounce rates had started to climb up from April 2021 after easing from December 2020.

In the last two months, as Covid cases have come down in most parts of the country and the economy has opened up again, bounce rates have started coming down again. Many lenders have reported that collection efficiencies have returned to normal and are at the pre-second wave levels.

“The collection efficiency was reported at about 97 per cent for August 2021, further improving on 95 per cent reported in July 2021 (collection efficiency in April, May and June was 72 per cent, 67 per cent, 90 per cent respectively),” Mahindra Finance had said, recently.

Also read: Latest PLFS suggests India’s labour market is reviving post-pandemic but some segments are hit

With the opening of the economy and improved mobility, it witnessed a meaningful reduction in the NPA contracts during the month as customer cash flows improved and said it expects the downward trajectory to continue in September.

Similarly, CreditAccess Grameen reported that standalone collection efficiency including arrears improved to 99 per cent in August 2021 from 97 per cent in July 2021 and 84 per cent in June 2021, indicating consistent improvement in overdue collections.

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As Covid wave ebbs, UPI transactions hit record in July, BFSI News, ET BFSI

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UPI continues to record growth despite lockdown restrictions aided by the pandemic.

Unified payment interface (UPI) transactions rose to record 3.24 billion transactions in July, up 15 per cent over June, while value-wise the transactions were up 10.7 per cent at Rs 6.06 lakh crore.

The performance

The platform saw 2.8 billion transactions worth Rs 5.47 lakh crore in June, up 10.6 per cent in volume terms and 11.56 per cent in value terms over May.

UPI transactions fell in volume as well as in value for the second consecutive month in May as lockdowns restricted economic activity.

About 2.53 billion transactions worth Rs 4.9 lakh were recorded in May, a 4.16% drop in volume and 0.6% fall in value compared with April, according to National Payments Corp of India data.

Digital payment index

Digital payments recorded a growth of 30.19 per cent during the year ended March 2021, reflecting the adoption and deepening of cashless transactions in the country, RBI data showed.

As per the newly constituted Digital Payments Index (RBI-DPI), the index rose to 270.59 at the end of March 2021, up from 207.84 a year ago.

“The RBI-DPI index has demonstrated significant growth in the index representing the rapid adoption and deepening of digital payments across the country in recent years,” the RBI said.

The Reserve Bank had earlier announced the construction of a composite Reserve Bank of India – Digital Payments Index (RBI-DPI) with March 2018 as a base to capture the extent of digitisation of payments across the country.

The RBI-DPI comprises five broad parameters that enable the measurement of deepening and penetration of digital payments in the country over different time periods.

These parameters are — Payment Enablers (weight 25 per cent); Payment Infrastructure – Demand-side factors (10 per cent); Payment Infrastructure – Supply-side factors (15 per cent); Payment Performance (45 per cent); and Consumer Centricity (5 per cent).

UPI on the fast track

UPI transaction volumes surged 43.2% in the first quarter of the last fiscal, 98.5% in the second quarter 104.6% in the third and 112.5% in the fourth quarter.

While IMPS volumes degrew 9.6% in Q1, they rose 26% om Q2. 40.5% in the third quarter and 42.9% in the fourth quarter.

National Automated Clearing House (NACH) volumes grew 32.8 in the first quarter, 13 in second, 0.9 in third while they degrew 10.2 in the fourth.

BBPS volumes grew 66% in Q1, 103.2 in Q2, 84.4 in Q3 and 102.7 in Q4 while National Electronic Toll Collection, the NHAI’s Fastag system logged 83.9 growth in Q1, 249.2 in Q2, 195 in Q3 and 75.3 in the fourth quarter.

On the other hand, RTGS volumes degrew 26.2 in Q1, logged 3.1 in Q2, 10.2 in third and 31.1 in the fourth quarter.

NEFT volumes degrew 3.9% in the first quarter, grew 9.8 in second, 23.2 in third, 17.8 in the fourth quarter.



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RBI’s new rules on interchange fee, 24/7 bulk clearing facility functional, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India‘s new directions on raising interchange fee and making available the facility of bulk clearing round the clock have become effective from Sunday onwards.

The RBI in June raised the interchange fee for financial transactions from Rs 15 to Rs 17, while for non-financial transactions the increase was done from Rs 5 to Rs 6. These new rates have become applicable from August 1, 2021, as per the RBI’s direction.

An interchange fee is a fee charged by banks to the merchant who processes a credit card or debit card payment.

Besides, the National Automated Clearing House (NACH) has been made available on all days of the week, effective August 1, 2021.

NACH, a bulk payment system operated by the National Payments Corporation of India (NPCI) facilitates one-to-many credit transfers such as payment of dividend, interest, salary and pension.

It also facilitates the collection of payments pertaining to electricity, gas, telephone, water, periodic instalments towards loans, investments in mutual funds and insurance premiums.

During the bi-monthly monetary policy review in June, RBI governor Shaktikanta Das had announced that in order to further enhance the convenience of customers, the NACH will be available on all days of the week.

The facility was available only when banks were open, usually between Monday to Friday. Auto-debit instructions given by the bank account holder were not processed on days the bank were closed like Sundays, bank holidays and even gazetted holidays. Further, since most companies use NACH for salary credits these also did not happen on bank holidays.

Meanwhile, ICICI Bank has revised charges for cash withdrawals from ATMs, cheque books and other financial transactions from August 1. The revised charges will be applicable for domestic savings account holders including salary accounts.



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From August 1, get your pay on bank holidays, too

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Starting August 1, you will be able to get your salaries and pensions credited over the weekend, too, with the National Automated Clearing House (NACH) becoming available on all days of the week.

RBI Governor Shaktikanta Das announced the move on Friday. “In order to further enhance customer convenience, and to leverage the 24×7 availability of RTGS, NACH which is currently available on bank working days, is proposed to be made available on all days of the week effective from August 1, 2021,” he said.

NACH is a bulk payment system operated by the NPCI and facilitates one-to-many credit transfers. Over 40.6 crore transactions (credits and debits) were presented on the NACH platform in May.

Digital drive

Amidst the rising adoption of digital payments, the move is set to benefit customers. Apart from getting salaries and pensions over weekends, customers will also be able to make payments such as EMIs and SIPs over the weekend.

Das noted that NACH has emerged a prominent mode of direct benefit transfer (DBT) to a large number of beneficiaries and has helped transfer of government subsidies on time.

At present, it is available on days banks work and auto debit transactions are not processed on holidays.

Vishwas Patel, Chairman, Payments Council of India, said it will speed up payments. “As IMPS, NEFT and RTGS are moving into real-time payments, NACH being available on all days will help employees get salaries on time, faster and even on weekends,” he said.

Jithesh PV, Vice-President and Head, Digital Banking, Federal Bank, said: “More partners such as NBFCs and products like bill payments may move to NACH as it is now available on all days making it a more convenient platform.”

“Availability of NACH on all days will further the financial inclusion objectives through DBT,” said SS Mallikarjuna Rao, MD and CEO, Punjab National Bank.

Also read: Non-banking finance cos seek easier rules for cancelling NACH mandates

 

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RBI, BFSI News, ET BFSI

Banking & Finance

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Bulk payment system, National Automated Clearing House (NACH) will be operational all days of the week effective from August 1, 2021. NACH is operated by NPCI and facilitates one-to-many credit transfer such as payment of dividend, interest, salary and pension.

RBI said, “NACH has emerged as a popular and prominent digital mode of direct benefit transfer (DBT) to large number of beneficiaries. This has helped transfer of government subsidies during the present COVID-19 in a timely and transparent manner. NACH is currently available only on the days when banks are functional. In the interest of customer convenience, and to take advantage of the availability of RTGS on all days of the year, it is proposed to make available NACH on all days of the week throughout the year, effective August 1, 2021.”

NACH has enabled large scale direct benefit transfer programmes of several government schemes to a large number of beneficiaries and helped government transfer subsidies during the Covid-19 pandemic.

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Non-banking finance cos seek easier rules for cancelling NACH mandates

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Non-banking finance companies, especially those with an asset base of less than ₹500 crore, have sought relaxation in rules for cancelling National Automated Clearing House (NACH) mandates by their customers. The Finance Industry Development Council (FIDC) has written to the National Payments Corporation of India “to provide cancellation facility through simpler means such as Whatsapp and SMS” in a secure manner.

In a letter to the NPCI Managing Director and CEO, Dilip Asbe, FIDC has said this would enable customers to cancel NACH mandates in a simple manner rather than having to access the companies’ websites to carry out such a request. NACH or “National Automated Clearing House (NACH)” for banks, financial institutions, corporates and government is a web-based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature and bulk payments.

‘Best effort’ basis

It has also requested NPCI to allow small NBFCs (with asset base of less than ₹500 crore – which are categorised by the RBI as non-systemically important) to provide such a facility on a “best effort” basis and not as a mandate.

“Most of our members are small NBFCs that operate in limited geographies and provide the vital last mile credit delivery to unserved and under-served segments of the economy including agriculturists, MSME, small road transport operators,” FIDC said in the letter, adding that many of these NBFCs are very small and do not have a well developed website.

Further, many of their customers are not tech-savvy and are not comfortable with transacting on electronic platforms though they may be comfortable in using SMS or WhatsApp, it has said.

“Small NBFCs have, with great difficulty, convinced their customers to use electronic and non-cash means for EMI payments, but still the prevalence of cash repayments is significant,” FIDC said, adding that the provision of the facility for cancellation of NACH mandates is neither feasible nor effective in achieving the ultimate objective of customer empowerment.

NPCI guidelines

In a circular dated September 11, 2020, NPCI had come out with guidelines to provide customers the facility for online cancellation of NACH mandates.

“In order to faciliate online submission of customer request for mandate cancellation, all the entities that are obtaining the mandates from the customer shall provide an option to the customer to submit the stop/cancellation request through their website or any other electronic channels,” NPCI had said in a circular, noting that customers have to reach out to the company or the bank branch and submit the cancellation request in á physical form.

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