The National Automated Clearing House (NACH) system is a popular mode of automated payments in India. It handles recurring payments like loan EMIs, utility bills, or subscription fees. However, if a NACH payment fails, the consequences can be inconvenient and financially burdensome too.

Here’s what happens when your NACH payment fails and what you should do in such cases.

Reasons for NACH Payment Failure

Insufficient Funds: If your bank account does not have enough money to cover the scheduled payment, the transaction will fail.

Example: Suppose your EMI of Rs 10,000 is due, but your account balance is Rs 8,000. In this case, the NACH debit will not go through.

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Technical Glitches: Sometimes, technical errors at the bank’s end or a failure in the NACH system can lead to payment rejection.

Mandate Expiry or Issues: Your NACH mandate, the authorisation allowing automatic debits, might have expired or been incorrectly set up.

Account Issues: Sometime payments may fail if your account is frozen, dormant, or flagged for suspicious activity.

Consequences of NACH Payment Failure

Payment Penalty: Most lenders or service providers impose fees if a payment fails.

Adhil Shetty, CEO of Bankbazaar.com, says,“A home loan EMI payment failure might attract a late fee of the EMI amount. Similarly, if your mutual fund Nach payment fails, you may be charged a fee by the bank while some banks may not levy the NACH failure charges.”

Bounce Charges by Banks: Banks charge a penalty for failed NACH debits, typically ranging from Rs 200 to Rs 750, depending on the bank.

Impact on Credit Score: A missed EMI or loan repayment reflects poorly on your credit history. Repeated failures can significantly lower your credit score.

Service Disruption: Utility providers or subscription services might discontinue services until the payment is resolved.

What Should You Do After a NACH Payment Failure?

Identify the Cause: Check your bank account statement or contact your bank to find out why the payment failed. Was it due to insufficient funds, mandate expiry, or a technical issue?

Rectify the Issue: If the failure was due to insufficient funds, immediately deposit the required amount in your account.If the mandate expired, contact your service provider or lender to renew it.

Manually Pay the Dues: Most lenders and service providers allow alternative payment modes, such as net banking, UPI, or cheque. Make the payment manually to avoid further penalties.

Contact the Beneficiary: Inform your lender, utility company, or subscription service about the payment failure. Request a waiver for penalties if it was a one-time issue or due to technical reasons. If your EMI payment failed due to a server glitch, explain the situation to your lender and request them to waive the late fee.

Shetty suggests, “Ensure adequate funds in your account at least 2-3 days before the scheduled NACH debit date to avoid failure of payments. Regularly monitor transactions to spot issues early.”

How to Prevent NACH Payment Failures in the Future?

Maintain Balance and Set Reminders

Keep your account sufficiently funded, accounting for both scheduled payments and unexpected debits. Also, it is important to use mobile apps or bank notifications to remind you of upcoming NACH debits.

You can also keep track of the expiry dates of your NACH mandates and renew them well in advance. A failed NACH payment can lead to penalties, inconvenience, and damage to your credit score. Address the issue promptly to minimise repercussions. Stay proactive by maintaining sufficient funds and monitoring your mandates.