What is a Mandate?

A mandate is any official order or instruction that gives authority to the receiver to facilitate service. It is usually used in the context of banking, where a mandate helps to make recurring payments at a particular date to a specific business or entity. 

Launched by the RBI and the National Payments Corporation of India, this service helps you automate payments, such as loan EMIs, insurance premiums and more, by sending instructions to your bank. 

Types of Mandate

In banking, there are two types of mandates. 

  1. NACH Debit

This type of mandate allows banks and merchants to collect recurring payments from their customers. These include EMI, credit card bill, SIP investment amount, etc. 

  1. NACH Credit

This mandate allows customers and businesses to deposit recurring payments into the beneficiary amount without manual instructions for every transaction. Businesses giving salaries to the employees, pensions, interest payments to the customers, etc., are a few examples.  

Advantages of Mandate

Here are the benefits different entities get to enjoy with mandates:

For Customers

  • It helps automate recurring payments
  • It can save time
  • It helps avoid late payments or missing the due date
  • Customers can cancel the facility at any time at their convenience
  • You can authenticate your request using net banking credentials
  • It gives you a secure payment option

For Banks

  • It helps banks receive the payment on time
  • It reduces the chances of fraud and theft
  • It is an effective solution for receiving payment from a large pool of customers
  • It allows banks to swiftly disburse payments
  • It helps the bank improve its customer service

For Organisations

  • Businesses can easily settle their bill payments 
  • It helps improve customer satisfaction 
  • Businesses can easily initiate large sum payments within a short period 

FAQs on Mandate

What is an example of a mandate?

If you have invested in SIP, a fixed amount is effortlessly deducted from your bank account on the same date every month. For this, you must instruct your bank to pay the beneficiary. This is an example of a mandate.

Is the bank mandate safe?

Yes! It is a more secure option than making online payments, as there is less chance of payment failure.

What is an e-mandate?

This is an electronic payment service introduced by NPCI and the RBI, using which consumers can give standing instructions to automatically debit payments from their bank accounts.

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