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  • Writer's pictureAbhijit Shankaran

The Data Silo Problem Banks/NBFCs face with NACH Management

"Data silos" pose a persistent challenge in the lending business of Banks and Non-Banking Financial Organizations (NBFCs), specifically in the context of NACH (National Automated Clearing House) Management operations.

NACH has been pivotal in transforming the challenges of processing bulk payments across varying loan products and EMI cycles. However, significant data silos emerge during 1) NACH Mandate Registration, 2) NPCI Validation of Mandates, and 3) Payment Transaction Processing, affecting the overall performance of these financial activities.

Streamline data silos: A visual representation of interconnected data sources being consolidated for efficient management.

Before proceeding to the emergence of the Data silos, below is an elaboration of the NACH Management Process.

There are 4 Main Stakeholders in this process workflow

  1. Borrower: The customer who takes a loan

  2. Sponsor Bank: The Bank from which the borrower has taken a loan

  3. NPCI (National Payments Corporation of India): An initiative by the Reserve Bank of India (RBI) for operating retail payments and settlements

  4. Destination Bank: The bank that the borrower/beneficiary holds their savings/current account from which the amount is debited towards the loan

The NACH process is understood in 2 sub-processes as

Mandate Registration

The borrower initiates the NACH Mandate Registration process by submitting a NACH Mandate to the sponsor bank to automate recurring payments. This mandate instructs the sponsor bank to debit payments from the destination bank (Borrower's Savings/Currrent Account). Post receiving the mandate, the sponsor bank verifies and authenticates the information to comply with NACH regulations. Once verified the sponsor bank sends the mandate to the NPCI for further validation.

The NPCI, forwards the mandate details to the Destination Bank for approval. The Destination Bank evaluates and approves the NACH Mandate, indicating its readiness to process debit transactions under the allowed mandates.

The choice between physical mandates and e-NACH mandates can impact Turn Around Time (TAT), with e-NACH mandates resulting in faster approvals and processing due to their electronic nature.

Physical Mandates

The Borrower completes a physical mandate form issued by the Sponsor Bank providing bank account details, loan information, and debit authorization among others. The Sponsor Bank then verifies the filled mandate against the borrower's loan details. The validated physical mandates are sent to the National Payments Corporation of India (NPCI) to further check for compliance with NACH requirements. Once compliance is confirmed, the NPCI assigns a UMRN (Unique Mandate Reference Number) to the registered mandate. The purpose of the UMRN is to identify and track the mandate. Following this, the NPCI sends the mandate to the Destination Bank for authorization. Post authorization, loan repayments are automatically deducted from the borrower's account on the agreed-upon schedule.


Customers register their eMandate with their destination bank via an e-NACH eMandate service portal supplied. The mandate information is transferred to the National Payments Corporation of India (NPCI) and then to the Sponsor Bank. Similar to the physical mandate, the NPCI assigns a UMRN for the mandate which is then sent to the Sponsor Bank. The amount set for debit is subsequently deducted from the destination bank on the given date, as per the provisions of the mandate.

Transaction Processing

Once the mandate is approved, the NPCI presents the authorized mandate data to the Destination Bank, thereby commencing transaction processing. This step is called NPCI Presentation. During this step, the Sponsor Bank generates debit instructions based on the registered and approved mandates. The Sponsor Bank then sends these debit instructions to NPCI for processing, and NPCI performs fund clearing and settlement, transferring funds from the borrower's account to the Sponsor Bank via the Destination Bank.

Threefold data silo junctures in NACH Management

A closer look at NACH management reveals three critical junctures where data silos tend to form, generating complexity that resonates throughout the streamlined operation:

Juncture 1: NACH Mandate Registration

The data silos in NACH Mandate Registration result from differences in mandate information caused by separate databases and a lack of synchronization. Inefficient communication methods and different systems for physical and electronic demands exacerbate integration issues, potentially resulting in delays and isolated information sets. Manual approval processes without automated confirmations may result in additional data silos, especially if approval statuses are not updated immediately. Divergent procedures for physical and e-mandates, along with processing time discrepancies, might result in inconsistent Turn Around Time (TAT). Furthermore, data silos might form when there are possible customer information mismatches and anomalies in customer details, such as account numbers or personal information, arise throughout the mandatory registration procedure. Furthermore, a mandate failure during registration might result in data silos, necessitating manual intervention and potentially affecting the succeeding steps.

When the borrower submits the NACH Mandate to the sponsor bank, painstaking attention is paid to detail verification. To ensure data correctness, the information in the mandate is rigorously cross-verified with the bank's Loan Management System (LMS). Precision is essential when managing bulk mandates since any errors or obsolete information within the mandate or the LMS might lead to data consistency concerns. Consider a discrepancy in the "Account Number" information; not only must it be recognized quickly, but manual intervention, including customer contact, is required. Even with improved KYC (Know your Customer) standards, such interventions might cause unnecessary delays, emphasizing the crucial significance of thorough data processing during mandate registration.

Juncture 2: NPCI Validation of Mandate

Data silos during NPCI validation occur as a result of data discrepancies, which can cause sponsor bank records to misalign with NPCI validation. Communication gaps or delays between the NPCI and the target bank can increase data silos, highlighting the significance of regular updates and synchronization. Divergence in NPCI validation processes for physical and e-mandates creates independent workflows, which may result in isolated information sets. Furthermore, data silos might arise when there are possible customer information inconsistencies during validation, resulting in discrepancies in the validation process. Furthermore, mandate failures at the NPCI validation stage might lead to data silos, necessitating remedial steps and reducing the overall accuracy of the validation process.

Once the sponsor bank submits the NACH mandate to the NPCI, the NPCI carries out validation of the mandate and accordingly approves/rejects the mandate. If the mandate is rejected, the reason for rejection is also mentioned by the NPCI which would have to be rectified before being re-presented to the NPCI. Banks must proactively identify and rectify discrepancies before the mandate reaches the NPCI. This highlights how important comprehensive internal validation is to reduce mistakes and guarantee a more seamless and effective NACH management process.

Juncture 3: Payment Transaction Processing

Data silos in Payment Transaction Processing arise from integration issues between sponsor banks and NPCI systems, resulting in inconsistent data exchange and transaction inconsistencies. Challenges in preserving data integrity during debit instruction creation, as well as inadequate monitoring systems, lead to data silos, making it difficult to follow and reconcile payment operations owing to differences in transaction records. Furthermore, data silos might arise when there are possible borrower information discrepancies during payment transaction processing, calling for re-validation of customer details to check for errors or inconsistencies. Furthermore, mandate failures throughout the payment transaction processing stage may result in data silos, prompting remedial steps and perhaps affecting money clearing and settlement.

The customer's bank initiates the payment transaction process after the NACH mandate is authorized and the EMI repayment is initiated. In the scenario that a borrower's lack of cash might result in transaction failures and call for feedback to be sent to the Loan Management System (LMS). This step is essential for management visibility, particularly in light of possible penalty charges banks may need to deduct for unsuccessful transactions. It becomes essential to provide this data back to the LMS for tracking purposes as well as for the tactical management of any potential financial repercussions. This impact is amplified in the broad NACH structure spanning many EMI cycles and borrowers.

How CHASSIST is a one-stop solution for eliminating Data silos in NACH Management

CHASSIST is a fully integrated comprehensive technology product solution specifically built for the lending business of Banks and NBFCs equipped to handle end-to-end bulk NACH/ECS mandates and transactions.

The Key term "end-to-end" as a description not only implies complete NACH mandate management but also being a strategic enabler by providing visibility to management across the workflow.

The 3 Junctures are addressed as below

Juncture 1: Improving Data Quality

The mandate registration process with CHASSIST ensures that Loan Account details move smoothly from the bank's source system to CHASSIST, resolving possible data silos created by variances in mandate information across distinct databases. CHASSIST makes it easier to match and validate loan data by using cutting-edge OCR technology for auto-validation, which reduces manual effort while improving data completeness and accuracy.

The solution also has a user-friendly interface that allows borrowers to submit scanned images of the mandate registration form, thereby improving the accuracy of mandate information. API calls smoothly communicate requirement registration data to NPCI, allowing for batch synchronization. CHASSIST provides a speedy response method, with NPCI issuing acknowledgements to the Sponsor Bank verifying data receipt and including the Unique Mandate Registration Number (UMRN), status, and reasons for rejection.

In scenarios of mandate rejection, CHASSIST allows for manual correction of data, ensuring proper representation in the NPCI system. The technology further encourages collaboration by allowing the destination bank to transmit approved registered mandates to NPCI for routing back to the sponsor bank, resulting in a unified process.

Juncture 2: Seamless NPCI Integration

CHASSIST plays a vital role in reducing data silos throughout the NPCI Mandate Validation process. The platform ensures that registration data is transferred seamlessly to the NPCI for mandate validation, followed by ACK (acknowledgement) with approval/rejection status and reasons for rejection. CHASSIST serves as a bridge, allowing manual correction of rejected mandate registration records before re-submitting them to the NPCI system.

The technology enables a highly secure and scalable approach, which improves collaboration between destination banks and the NPCI. CHASSIST enables destination banks to return permitted registered mandates to NPCI for routing to the sponsor bank, thereby supporting a unified workflow and decreasing the possibility of disparate information sets.

Juncture 3: Payment Transaction Processing

CHASSIST allows for the creation of transaction files from the Loan Management System (LMS) or any other source system, assuring a pre-specified structure for easy data transfer to CHASSIST. The built-in 'Auto-Validation' feature verifies registered mandate transaction data, lowering the likelihood of inconsistencies and improving data integrity. CHASSIST, as a strategic enabler, sends the transaction presentation file to the NPCI System via encryption algorithms ensuring scalable processes.

In the event of rejection, manual correction of rejected mandate registration records is permitted to ensure accurate re-presentation. The platform effectively processes response files for receipts and rejections, returning the data to the originating system and fostering a unified workflow.

CHASSIST manages the rerun process, which arranges representation after three days for transactions that failed owing to inadequate balance. CHASSIST offers proactive communication by sending borrowers SMS and email notifications for each failing transaction, increasing management visibility and mitigating the effect of transaction failures on the whole NACH workflow.


Data silos are a fundamental complexity in NACH management. Despite automation, complications remain at critical points such as mandate registration, NPCI validation, and payment processing. CHASSIST emerges as a complete solution for end-to-end NACH operations.

CHASSIST addresses critical issues at each stage. It enables smooth information flow and integrates easily with numerous systems for mandate registration. CHASSIST's efficiency in payment processing is demonstrated via scheduled repetitions for unsuccessful transactions and proactive borrower communication.

CHASSIST is an innovative and effective solution that provides clarity and cohesiveness in NACH management operations in its ability to effectively eliminate data silos and provide end-to-end visibility for management.


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