National Electronic Fund Transfer
National Electronic Funds Transfer (NEFT) is one of the most prominent electronic funds transfer systems of India. Started in Nov.-2005, NEFT is a facility provided to bank customers to enable them to transfer funds easily and securely on a one-to-one basis. It is done via electronic messages. This is not on real-time basis like RTGS (Real Time Gross Settlement). This is a "net" transfer facility which is executed in hourly batches resulting in a time lag. NEFT facilities are available in 30.000 bank branches all over the country and work on a batch mode.
NEFT has gained popularity due to it saving on time and the ease with which the transactions can be concluded. This reflects from the fact that 42% of all electronic transactions in the 2008 financial year were NEFT transactions.
How this works
Step-1 : Customer fills an application form providing details of the beneficiary (like name, bank, branch name, IFSC, account type and account number) and the amount to be remitted. The remitter authorizes his/her bank branch to debit his account and remit the specified amount to the beneficiary. This facility is also avialble through online banking and some banks offer the NEFT facility even through the ATMs.
Step-2 : The originating bank branch prepares a message and sends the message to its pooling centre (also called the NEFT Service Centre).
Step-3 : The pooling centre forwards the message to the NEFT Clearing Centre (operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be included for the next available batch.
Step-4 : The Clearing Centre sorts the funds transfer transactions destination bank-wise and prepares accounting entries to receive funds from the originating banks (debit) and give the funds to the destination banks(credit). Thereafter, bank-wise remittance messages are forwarded to the destination banks through their pooling centre (NEFT Service Centre).
Step-5 : The destination banks receive the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary customers’ accounts.
Service Charges for NEFT
The structure of charges that can be
a) Inward transactions at destination bank branches (for credit to beneficiary accounts):
- Free, no charges to be collected from beneficiaries
b) Outward transactions at originating bank branches (charges for the remitter):
- For transactions up to 10,000: not exceeding 2.50 (+ Service Tax)
- For transactions above 10,000 up to 1 lakh: not exceeding 5 (+ Service Tax)
- For transactions above 1 lakh and up to 2 lakhs: not exceeding 15 (+ Service Tax)
- For transactions above 2 lakhs: not exceeding 25 (+ Service Tax)
Currently, NEFT operates in hourly batches - there are twelve settlements from 8:00 AM to 7:00 PM on week days and six settlements from 8:00 AM to 1:00 PM on Saturdays.
Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. As of 2013, all transactions initiated before 5 PM will be settled on same day. No transactions are settled on weekly holidays and public holidays.
- "Overview of Payment Systems in India". Reserve Bank of India. Retrieved 24 January 2015.
- "FAQ- NEFT System". Reserve Bank of India. Retrieved 24 January 2015.
- "National Electronic Funds Transfer System - Procedural Guidelines". Reserve Bank of India. Retrieved 24 January 2015.