by National Electronic Funds Transfer (NEFT) is a nationwide payment system enabling the electronic transfer of funds from one bank account to another. It is a secure, efficient, and widely-used platform managed by the Reserve Bank of India (RBI). NEFT functions on a batch processing system, allowing individuals and businesses to transfer funds in near-real-time. Transfers can be initiated online via internet banking, mobile apps, or physically at bank branches. Transactions are settled on an hourly basis during operational hours, ensuring reliability and speed. NEFT supports a wide range of payments, including interbank transfers, credit to loan accounts, and inward remittances.
Origin of NEFT in India:
Introduced by the Reserve Bank of India in 2005, NEFT replaced the earlier Special Electronic Funds Transfer (SEFT) system, providing a more accessible and robust alternative. Its design aimed to promote a cashless economy and strengthen interbank fund transfers across urban and rural regions. Over time, NEFT has undergone significant upgrades, including 24×7 availability since December 2019, reflecting the RBI’s push towards digital financial inclusivity. This milestone allowed real-time fund transfers at any time, contributing to its widespread adoption across individuals, businesses, and government organizations. NEFT has become a cornerstone in India’s move towards a digitally empowered financial system.
NEFT Process:
NEFT (National Electronic Funds Transfer) process facilitates the transfer of funds electronically between banks in India.
1. Initiation of Transaction:
The sender provides details such as the beneficiary’s name, account number, bank name, branch, and IFSC (Indian Financial System Code). Transactions can be initiated via online banking, mobile banking apps, or at a bank branch.
2. Sender’s Bank Processing:
The sender’s bank verifies the details and forwards the transaction request to its NEFT Service Centre.
3. Central Processing by RBI:
NEFT Service Centre bundles multiple transactions into batches and forwards them to the Reserve Bank of India (RBI), the clearing and settlement authority. RBI processes the transactions in hourly settlement batches during operational hours.
4. Clearing and Settlement:
The RBI routes the payment instructions to the beneficiary’s bank. Settlements are carried out in real-time gross settlement mode within the hourly batch.
5. Beneficiary Bank’s Role:
The beneficiary’s bank credits the funds to the recipient’s account upon receiving instructions from the RBI.
6. Confirmation:
Both the sender and beneficiary are notified of the transaction’s success or failure through SMS, email, or banking alerts.
NEFT Timings:
NEFT works on a deferred settlement basis which means the transactions are carried out in batches. Earlier, NEFT transactions were available from 8:00 AM to 6:30 PM from Monday to Friday only. However, RBI has regularised that NEFT transactions will be available 24*7 on all days of the year, including holidays.
Also, after usual banking hours, NEFT transactions are expected to be automated transactions initiated using ‘Straight Through Processing (STP)’ modes by the banks.
How to Transfer Funds through NEFT?
Online Transfer through Internet or Mobile Banking
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Login to Your Bank Account:
Access your account using the bank’s internet or mobile banking platform.
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Add Beneficiary:
Go to the “Add Beneficiary” or “Payee” section. Provide the beneficiary’s details such as name, account number, bank name, branch, and IFSC code.
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Beneficiary Approval:
Once added, the bank may take a few minutes to several hours to verify and approve the beneficiary.
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Initiate Transfer:
Navigate to the fund transfer section and select NEFT. Choose the beneficiary and enter the transfer amount and any remarks if required.
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Review and Authenticate:
Review the entered details carefully. Authenticate the transaction using the provided OTP or transaction password.
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Receive Confirmation:
Post successful transfer, a confirmation message will be displayed or sent via SMS/email.
Offline Transfer at Bank Branch
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Visit the Bank Branch:
Go to your bank branch and request an NEFT application form.
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Fill the Form:
Provide the beneficiary details such as name, account number, bank name, branch, IFSC, and the amount to be transferred.
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Submit the Form:
Hand over the form along with the transfer amount if not debiting directly from your account.
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Processing by the Bank:
The bank will process the NEFT request and initiate the transfer in the next available batch.
- Confirmation:
Collect the receipt and check for updates regarding the transfer’s success.
Charges applicable to NEFT:
1. Online NEFT Transactions (via Internet or Mobile Banking):
- No Charges:
As per the Reserve Bank of India (RBI) directive issued in January 2020, there are no charges for NEFT transactions made through internet banking or mobile banking platforms.
2. Offline NEFT Transactions (at Bank Branches):
Banks may levy charges for NEFT requests processed in physical mode (at branches). These charges are set within the limits prescribed by the RBI and vary slightly across banks.
Below is an indicative structure:
- Up to ₹10,000: ₹2.50 + GST.
- ₹10,001 to ₹1 Lakh: ₹5.00 + GST.
- ₹1,00,001 to ₹2 Lakhs: ₹15.00 + GST.
- Above ₹2 Lakhs: ₹25.00 + GST.
Special Cases:
- Priority Customers: Premium account holders may enjoy fee waivers, depending on the bank’s policy.
- Government Mandates: Certain beneficiary payments, such as those linked to government schemes, are NEFT-free.
Benefits of using NEFT:
1. Convenient and Accessible:
NEFT allows seamless transfer of funds from one bank account to another across India. It can be accessed both online (via internet or mobile banking) and offline (at bank branches), making it suitable for a wide range of users, including those without internet access.
2. Secure and Reliable:
NEFT transactions are regulated by the Reserve Bank of India (RBI), ensuring a high level of security. Each transaction is processed in encrypted batches, reducing risks and ensuring reliability.
3. Cost-Effective:
NEFT is economical, especially for online transactions where banks levy no charges. Even offline transactions at branches are affordable, making it an attractive choice for individuals and businesses alike.
4. No Transaction Limit:
While individual banks may impose their own restrictions, NEFT has no minimum or maximum transaction limit set by the RBI, making it ideal for both small and large fund transfers.
5. Nationwide Coverage:
NEFT is widely supported across India by most banks and branches. This vast network ensures easy fund transfers, regardless of geographic location.
6. Scheduled and Recurring Payments:
With NEFT, users can schedule future payments or set up standing instructions for recurring transactions, such as EMI payments, making financial planning simpler and hassle-free.
