ECS Return Charges

Banks have various charges and penalties that are not widely known like ECS, which is why awareness is necessary

If you are not careful about your banking transactions, you might face penalties and charges that might come as an unpleasant surprise. A relevant example in this context is ECS return charges, which not many people are aware of. Let’s understand the ECS return charges in detail and what you can do to avoid it.

What is ECS return charges?

‘ECS return charges’ is any penalty or fees that the bank charges in case an ECS mandate fails. ECS is a short form of Electronic Clearing Service. One can easily relate it to similar charges such as cheque bounce charges. ECS is used for various purposes such as loan EMIs, mutual fund SIPs, insurance premiums, subscriptions, utility bills, etc.

An incident of ECS return occurs when the company/biller presents an ECS debit request to your bank, but the transaction fails. This is often due to insufficient funds in your bank account. Since the bank has to incur expenses to process ECS debit requests, a failed transaction results in a return fee. In addition to the bank, the biller or lender can also impose their own additional penalties for a failed ECS debit request.

While an ECS return usually occurs due to insufficient balance, there can be other reasons too that you need to check. For example, it is possible that your account could be frozen by the bank due to any reason. In some cases, technical issues can also lead to an ECS return. An account under lien or garnishee order can also lead to an ECS return. It is important to find the exact reason for the ECS return, so that you can take the right action.

ECS return charges of various banks

Most banks have a similar structure for ECS return charges. For example, SBI charges around Rs 250 to Rs 500 + GST for ECS return charges. Similar rates are applicable for other banks such as HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank. Some banks have slightly lower ECS charges. For example, Bank of Baroda has ECS return charges in the range of Rs 200 to Rs 400 + GST. Similarly, Canara Bank charges Rs 150 to Rs 350 + GST. Public sector banks usually have lower ECS return charges, excluding some exceptions.

It is important to note that ECS return charges are applied per return or for every failed transaction. The charges are usually debited from your bank account. An 18% GST is added to the penalty amount. In exceptional cases, the ECS return charges could be waived off based on your financial history. If an ECS return charge has been applied, you will get a notification via email or SMS.

It is important that customers take ECS return charges seriously. It not only creates financial liability, but can also lead to other issues if such charges occur repeatedly. For example, the mandate can be cancelled by the biller if there are repeated ECS returns. Such cases will also negatively impact your CIBIL score. Legal action could also be taken if there are repeated ECS returns.

How to deal with ECS return charges

If you want to avoid nasty surprises, it is better to take steps to avoid ECS returns. Make sure you have adequate balance in your bank account and all the technical aspects are in proper order. However, if an ECS return occurs even then, you need to top up your account and contact the biller/lender and request them to re-present the ECS. This approach can help avoid the ECS return charges. If there is any penalty imposed, settle it quickly to avoid negative entries in your CIBIL report.