LotusPay

ACH Debit penalty charges for high percentage of returns

In Circularlink icon NPCI/2023-24/NACH/007, NPCI announced new measures to curb the high percentage of returns.

In Circularlink icon NPCI/2023-24/NACH/012, NPCI set out the detailed phases and penalties.

In Circularlink icon NPCI/2023-24/NACH/014, NPCI revised the dates of the phases.

NPCI is implementing the following measures:

Phase I (effective 1 Apr 2024)

Additional charges of Rs 1 per return transaction to be levied on creditors with returns above 50%. The charge is only on the quantum of returns above 50%.

Phase II (effective 1 Jul 2024)

Additional charges of Rs 5 per return transaction to be levied on creditors with returns above 50%. The charge is only on the quantum of returns above 50%.

Phase III (effective 1 Oct 2024)

Creditors with returns above 50% will be barred from registering new mandates on their utility code, until such time as the returns are reduced below 50%.

General points:

  • Technical returns will not be considered.

  • The calculation is done at the level of utility code and sponsor bank pairing.

NPCI advises creditors to take the following measures:

  1. Restrict the representation of the returned transactions to 2 times (1 presentation + 2 representations).

  2. Representation of a returned transaction can be done only after 3 days from the date of a return.

  3. Representation to be done only after confirmation from the customer concerned on the availability of balance.

  4. In case of repeated returns:

    1. User institutions should reach out to the customer and ensure that the presentation is resumed only after confirmation is received from the customer for honouring the debit transactions.

    2. Destination banks should review the operation of the account, advise the customer to maintain sufficient balance and in the event of no improvement follow the regulatory guidelines for handling such accounts.

LotusPay advice

To calculate your return percentage, look at the statuseslink icon for all of your debits in a calendar month.

Return percentage = returned_debits / (confirmed debits + returned debits)

You may ignore rejected debits for this calculation. For example, if you have 4 rejected debits, 17 returned debits, and 35 confirmed debits:

Return percentage = 17 / (17 + 35) = 33%

If your return percentage is 55%, then in Phase I, NPCI would levy the penalty on 5% of your debit count for the month.

You can determine your debit counts by going to Dashboard > ACH Debits, and applying filters by charge date and status.

For first presentation cases, you should use the product code 10. This is the default value. For representation cases, you should use the product code RPN. Product type does not impact the return percentage or penalty charges, but its use is recommended to give indication to destination banks.

NPCI periodically collects the penalty charges from the sponsor bank. The sponsor bank collects the penalty charges from the creditor (you). If your sponsor bank relationship is managed entirely by LotusPay, the sponsor bank collects the penalty charges from LotusPay, and LotusPay will invoice you.

As per the NPCI circular, a penalty of ₹25 per instance will be applicable from the third occurrence onwards for transactions returned by the destination bank with the reason “Account Closed.” The penalty amount will be debited from the respective corporate’s account.

However, at LotusPay’s end, if a debit transaction is returned with the reason “Account
Closed,” we immediately mark the corresponding mandate and all successive debits/subscriptions as cancelled to prevent further returns. If the account is closed by the user after the transaction is submitted, any penalty arising as per the NPCI circular will be applicable.

Last updated 3 months ago