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  • Writer's pictureAbhijit Shankaran

How Banks Can Overcome Operational Challenges in NACH Management

The National Automated Clearing House (NACH), facilitated by the National Payments Corporation of India (NPCI), has emerged as a critical instrument in the lending industry's transformation. The advantages of NACH for financial institutions are numerous, as it streamlines and expedites the loan repayment process.


However, many Banks, NBFCs and Financial institutions continue to face challenges in achieving end-to-end visibility during the loan repayment phase of their lending business. While NACH is a fantastic technology in and of itself, the lending landscape in India, marked by a surge in loan applications from a large number of customers, adds a layer of complexity. Tracking and registering these mandates, as well as managing mandates from start to finish, becomes challenging.


This blog examines the four critical challenges in NACH Management

  1. Tracking mandate handling

  2. Lack of reporting Insights

  3. Limited in-house control, and

  4. Complicated mandate registration

Intending to revolutionize operational procedures and satisfy the changing needs of the lending industry, we explore cutting-edge NACH Management Banking Technology solutions like CHASSIST.


What is NACH?


Fundamentally, NACH is a centralized electronic clearing system intended to support frequent, high-volume transactions. Introduced by the NPCI in 2016, this system has resulted in a major simplification of the payment process for the lending industry. Before the introduction of NACH, the handling of complicated transactions such as those of Post Dated Cheques (PDCs) created operational bottlenecks, which resulted in delays and inefficiencies.


These obstacles have been successfully removed by NACH, which has created a unified platform for the smooth online transfer of funds that is specially designed to satisfy the requirements of lending operations.


4 Operational Challenges in NACH Management


NACH management, from an operational perspective, grapples with the following challenges for banks, NBFCs, and financial institutions:


Challenge 1: Lack of configurability and adaptability in Legacy IT Systems


Many Financial Institutions in the lending business encounter challenges with their legacy IT systems which lack both the configurability and adaptability to integrate the latest banking technologies into their IT eco-system. The dilemma arises when financial institutions are faced with the question of revamping their entire IT infrastructure which is both expensive and will affect day-to-day operations. In response, there is a resorting to quick-fix solutions that are often available at low-cost throw-away prices inevitably increasing tech debt.


Challenge 2: Limited In-House Control over operations


Relying on third-party vendors makes it difficult to maintain agility. When control is delegated, customizing operations, adapting to changing requirements, and responding quickly to market dynamics become complex tasks, affecting the institution's ability to address operational changes and challenges quickly.



1 Man sitting on a desk and struggling with too many documents. Another man working on a computer screen with all documents in one window.


Challenge 3: Lack of insight into reporting and analytics


The ability to derive meaningful insights from transaction data is hampered by a lack of comprehensive reporting and analytics capabilities. This not only limits strategic decision-making but also makes it difficult to identify optimization opportunities within NACH processes. Improving operational visibility and efficiency requires the use of advanced reporting tools.


Challenge 4: Difficulty tracking NACH mandates


Tracking bulk NACH mandates across a populous customer base is quite challenging. There is further responsibility to ensure the safety of private customer information filled in these mandates. Owing to this complexity, innovative and safe solutions must be found to simplify procedures and guarantee precision and effectiveness in the handling of mandates from beginning to end.


Why NACH Management Banking Technology is a necessity?


The prime focus of NACH Management Banking Technology is to overcome the operational challenges that financial institutions experience while processing bulk payments across a large client base.


Key components of NACH Management Banking Technology include

  1. End-to-end mandate management modules,

  2. Transaction processing modules, and

  3. Advanced reporting tools.

When viewed holistically, these elements give financial organizations more operational control, improved transaction visibility, and insightful data for strategic decision-making.


Presenting CHASSIST, a state-of-the-art NACH management solution painstakingly designed to meet the particular needs of the lending industry. Upon closer examination of the operational details, it is evident that CHASSIST is more than just a tool; rather, it is a strategic asset with the potential to revolutionize lending operations' efficiency, control, and compliance.


Financial institutions can confidently offer loan products with Variable Monthly Installments (VMIs) as a repayment option with the help of a technological solution such as CHASSIST. Banks and non-banking financial companies (NBFCs) gain from this strategic move by giving their clients more flexible repayment options. This helps them keep and attract more customers and raises the possibility that they shall receive timely payments, which helps them stay profitable. In addition to streamlining processes, CHASSIST integration creates opportunities for innovative financial products.


The Four-Fold challenges are resolved in the manner mentioned below:-


Solution 1: Addressing the Lack of Visibility across Mandate Registration and Management


As an integrated system, CHASSIST uses OCR technology for document storage and security encryptions for handling sensitive data, thereby automating and simplifying the coordination of various payment obligations. Large-scale transaction processing on time is guaranteed by this solution, which also lessens the burden on operational resources and reduces the possibility of mistakes and delays. Furthermore, NPCI's Transaction Processing System and Mandate Management System can be seamlessly integrated with CHASSIST, improving overall operating efficiency.


Solution 2: Enhancing In-House Control with CHASSIST


CHASSIST expertly solves the issue of restricted in-house operational control. Financial institutions may reduce their reliance on third-party suppliers by using CHASSIST, which not only restores control over operation customization and adaption but also provides a user-friendly and readily accessible platform. This upgrade enables institutions to maintain agility, quickly adapt to changing requirements, and effectively traverse market dynamics, allowing for a rapid and focused reaction to operational changes and challenges.


Solution 3: Overcoming the Lack of Insight into Reporting and Analytics


CHASSIST delivers enhanced reporting tools to address the issue of limited visibility into reporting and analytics. Institutions may considerably increase their operational visibility and efficiency by implementing CHASSIST, providing the groundwork for more informed and strategic financial management. Furthermore, the system's interface with NPCI enables a continuous flow of data for complete reporting and analytics.


Solution 4: Streamlining NACH Mandate Tracking


CHASSIST greatly minimizes the complexity associated with operations by automating the interpretation of documents using OCR technology, assuring accuracy and expediency in mandate management of large-scale transactions. OCR Technology reduces manual efforts that go into data entry operations thereby enhancing operational productivity and efficiency. OCR helps in re-checking data and improving data quality by auto-approving on match aiding in the effective capture of data. CHASSIST's capability to auto-approve matches contributes to a smoother workflow.


Conclusion:

The introduction of NACH, led by the National Payments Corporation of India (NPCI), has resulted in considerable growth and revolutionised the lending business. While the benefits of NACH in speeding up loan repayment processes are obvious, the increase in loan applications has created operational issues for banks and financial institutions. As a result of these complications, the emergence of NACH Management Banking Technology has become critical, providing holistic solutions to improve operational control, transaction visibility, and strategic decision-making.


CHASSIST, a cutting-edge NACH management solution precisely created to fit the lending industry's particular demands, stands out as a groundbreaking asset. It addresses the four-fold challenges encompassing visibility, in-house control, reporting, and the tracking of NACH mandates and paperwork. CHASSIST goes beyond just a tool by seamlessly integrating with NPCI and using OCR technology; it becomes a catalyst for transforming the efficiency and compliance of lending operations in the sector.

 

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