What is a NACH Utility Code?
A utility code is a user identification number assigned by NPCI to a corporate user of eNACH. Utility codes are also known as corporate user IDs and are crucial to track the mandates associated with a corporate account.
To leverage eMandates, corporate organizations must register for NACH services at NPCI (National Payments Corporation of India). A utility code is assigned to the corporate within two working days of registration.
The utility code is used to verify the transactions conducted in the account of the corporate organization and is frequently checked to ensure that there are no mismatches. If a corporate’s utility code does not match at any point of the NACH debit process, the transactions is immediately refused by the NACH system.
It’s important to note here that the utility code is created when the corporate entity itself registers with NPCI, and not when corporates register a mandate. The latter is determined by a Unique Mandate Reference Number (UMRN), which is different from the utility code.
How Are Utility Codes Generated?
The generation of utility codes is done by NPCI after the sponsor bank lodges NACH payment files for the collection/distribution of funds on behalf of its corporate client enrolled for NACH services.
NPCI also assists the destination bank in uploading the transaction file, which is then assigned to the appropriate destination bank for processing. When the transaction is completed, the confirmation response is sent to the sponsor bank.
How Are Utility Codes Different From UMRN?
A Unique Mandate Reference Number (UMRN) is assigned to each new mandate created in the system. The NACH system generates it automatically after mandate creation. Every mandate amendment and cancellation transaction requires UMRN.
In contrast, utility codes are generated for each corporate entity registered with NPCI for NACH services. The UMRN is used to track individual mandates as they pass through the mandate registration & fund transfer processes. Both clients and corporates can use the UMRN to remain up to date regarding the status of mandates in real-time.
Apart from utility codes & UMRN, a merchant reference number is also generated. This is a one-of-a-kind payments code provided to merchants by their acquiring bank, also known as the payment processor. The merchant ID number is required for merchant identification in processing networks and for routing transactions through the proper channels to ensure that funds reach their intended destination.
How Are Utility Codes Used in NACH Debits?
Utility codes are used to perform a number of important functions in the NACH mandate system. Here are a few ways utility codes are used to streamline recurring payment transactions.
- Corporate number / Utility code validation:
The corporate number/utility code provided in the transaction data will be checked against the corporate number/utility code provided in the NACH system. If a mismatch occurs or the corporate / utility code does not exist, the transaction will be refused.
- Corporate number / Utility code linking with UMRN:
When mandates are registered, the NACH system will link the corporate code and the UMRN assigned to the mandates presented with the code. Both the sponsor bank and the corporate should confirm that the transaction file contains the right corporate code that was linked to the relevant UMRN. If there is a discrepancy, the NACH system will reject the transaction.
- Corporate registration with sponsor bank:
Any bank that wishes to operate as a sponsor bank for a corporate in order to process mandates must first register the corporate with NPCI. For such registration, the bank must submit a user registration form with their utility code.
- Corporate User Status:
If the corporate is new to the NACH system, NPCI will assign a new corporate code. In the case of an existing corporation, the corporate/utility code must be quoted in the user registration form to be registered. If a corporation is assigned a new code, the corporate/sponsor banks cannot utilise that code to conduct transactions relevant to mandates that have already been assigned a different utility code.
- Corporate Portability:
The NACH utility code is indispensable for when corporate entities move their mandates from one bank to another. The mandates operated by a corporate can be seamlessly transferred to another bank by using the utility code as reference.
How eMandates work using utility codes
The eNACH Mandate procedure consists of two major steps:
eMandates are first registered at the destination bank (i.e., the bank where the customer has an account). Mandate registration is completed in real-time using APIs or via Aadhaar/NetBanking credentials.
The mandate information is then forwarded to the sponsor bank, NPCI, and the numerous destination banks. The response is communicated with the eNACH provider once the destination bank confirms the eMandate.
Throughout this process, the utility code is used to track the mandates associated with the corporate.
Next, the balances in various customer accounts is checked at the respective destination banks and a response of the success rate of mandate registration is created. This response is communicated to the eNACH service provider.
- Fund Transfer
Following receipt of this response, the assigned money is debited from the destination bank and sent to NPCI, after which it is delivered to the sponsor bank and subsequently to the eNACH service provider’s nodal bank account.
Finally, the designated sum is deposited the next day to a corporate account.
Five Major eNACH Workflows Using Utility Code
The NACH utility code is utilized in a number of ways by eNACH mandate service providers to help streamline recurring payments.
Here are five crucial NACH workflows that use utility codes.
- Corporate clients can choose to use the utility codes of the NACH service provider. In this case, they can complete the comprehensive NACH workflow including mandate registration, debit sheet presentation and fund transfer.
- If the corporate client wants to choose their own utility code along with the NACH provider’s sponsor bank, the client can complete the mandate registration process using Aadhaar or API. The rest of the NACH process is handled by the sponsor bank.
- The client can choose the utility code of sponsor banks that aren’t associated with the NACH service provider. In such cases, the service provider handles only API mandate registration and debit sheet presentation. The rest of the process is handled by the chosen sponsor bank.
- The corporate client can choose to not use the NACH service provider’s utility code at all, and instead utilize the XML eSign facility. In this situation, the NACH service provider gives the corporate access to the Aadhaar XML file. This is used by the customer to eSign fir mandate registration. The rest of the NACH process is taken forward by a different sponsor bank.
- For NACH credit, the corporate entity simply sends the utility code and transaction details to NPCI after which the credit transactions are processed further.
Link.It: SignDesk’s eMandate Solution
Customers can safely authenticate e-mandates online using a debit card, NetBanking, or Aadhaar eSign. Every time a debit is scheduled, Mandates are further safeguarded with Additional Factor Authentication (AFA).
On the smart dashboard, mandates can be registered with utility code, updated, tracked, and deleted. Transaction histories, as well as mandatory failure rates, are available, allowing organisations to construct a reliable audit trail for payments.
E-mandates enable businesses to digitally scale up their payments, automate efficiently, and substantially reduce operating costs. SignDesk’s API-based e-mandates allow for bulk uploads of mandate data and have a 95% success rate.
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