The National Automated Clearing House (NACH) system is a popular mode of automated payments in India. It handles recurring payments like loan EMIs, utility bills, or subscription fees. However, if a NACH payment fails, the consequences can be inconvenient and financially burdensome too.
Here’s what happens when your NACH payment fails and what you should do in such cases.
Reasons for NACH Payment Failure
Insufficient Funds: If your bank account does not have enough money to cover the scheduled payment, the transaction will fail.
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Example: Suppose your EMI of Rs 10,000 is due, but your account balance is Rs 8,000. In this case, the NACH debit will not go through.
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Technical Glitches: Sometimes, technical errors at the bank’s end or a failure in the NACH system can lead to payment rejection.
Mandate Expiry or Issues: Your NACH mandate, the authorisation allowing automatic debits, might have expired or been incorrectly set up.
Account Issues: Sometime payments may fail if your account is frozen, dormant, or flagged for suspicious activity.
Consequences of NACH Payment Failure
Payment Penalty: Most lenders or service providers impose fees if a payment fails.
Adhil Shetty, CEO of Bankbazaar.com, says,“A home loan EMI payment failure might attract a late fee of the EMI amount. Similarly, if your mutual fund Nach payment fails, you may be charged a fee by the bank while some banks may not levy the NACH failure charges.”
Bounce Charges by Banks: Banks charge a penalty for failed NACH debits, typically ranging from Rs 200 to Rs 750, depending on the bank.
Impact on Credit Score: A missed EMI or loan repayment reflects poorly on your credit history. Repeated failures can significantly lower your credit score.
Service Disruption: Utility providers or subscription services might discontinue services until the payment is resolved.
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