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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