All You Need to Know About NEFT

A strong banking sector is considered the lifeline of a growing economy. The success and development of the banking industry do define the present and future of the economy. However, sticking to the traditional banking method won’t help achieve the much-needed sustainable development of the industry with the current era of technology. This is where the introduction of IT in India’s banking sector plays a vital role in improving the operational efficiency of banks. 

National Electronic Fund Transfer or NEFT is one of the offspring of the ongoing technological advancements in the country. It has made the basic banking activity of fund transfer easier for the bank account holders and eliminated the necessity to visit the bank branch and wait in long queues for money transfers.

Here, we will throw light on various sides of NEFT and how it benefits both consumers and merchants.

What is NEFT in banking?

NEFT is a nationwide payment mode introduced by the Reserve Bank of India (RBI) to allow the online transfer of funds from one bank’s account to another. Using NEFT transfer, a user can quickly transfer money between banks throughout the country. Since it involves electronic transfer of funds, it has eliminated the need to visit the nearest bank branch for fund transfer.

Features of NEFT money transfer

The NEFT system has become quite popular amidst the rise in online payments in India. It is regulated by the RBI and works in accordance with the guidelines issued by the apex bank. Some of the primary features of NEFT are as follows:

• NEFT transfer is a one-to-one payment facility.
• Bank branches must be NEFT-enabled to allow the account holders to transfer the funds to other parties.
• Although the NEFT transfer facility is available round the clock, the funds are settled in batches of half an hour (48 batches in a day).
• From 2020 onwards, a user can make NEFT transactions 24×7. Previously, RBI has fixed timings to process these transactions.
• For NEFT transfer, users must add beneficiaries to their net banking account.
• There is no maximum or minimum limit to how much money one can transfer via NEFT payments.
• With effect from Jan 1, 2020, no banks can levy any charges from saving account holders for fund transfers via NEFT system. However, outward transactions do attract certain charges as per the RBI guidelines.

Benefits of using NEFT payment transfer facility

There are several benefits that make NEFT a highly-preferred payment transfer method in India. These include:

• The NEFT payment system is based on a secure platform.
• It eliminates the need to use a cheque or demand draft for money transfer.
• It does not require the bank account holder to visit the branch in person.
• With NEFT, one can initiate fund transfer online.
• NEFT transfer is quick, smooth, and hassle-free.
• Both the sender and receiver of funds are notified upon successful transfer.
• Any account holder – individual or firm, can use the NEFT transfer facility.
• NEFT transactions can also be used to pay loan installments, credit card dues, etc.

What is NEFT process (at the bank side)?

In general, NEFT process consists of the following steps:

1. A customer requests NEFT money transfer at the bank branch (sender).
2. The request is then uploaded and processed at the NEFT service center/pooling center on the sender side.
3. The NEFT message is then transmitted to the NEFT center.
4. The message is then processed to the beneficiary banks.
5. Data is validated at the NEFT service center on the receiving side.
6. Payment is then transferred to the beneficiary.

How does NEFT work?

Here’s what a user needs to do to make an NEFT fund transfer –

• Log in to his net banking account
• Select fund transfer via NEFT
• Add beneficiary if you haven’t done so already by entering information like name, bank account number, and IFSC code
• Authenticate the addition of a beneficiary via an OTP received on the registered mobile number
• Once the beneficiary is added, select it from the list of beneficiaries
• Enter the amount to be transferred and confirm the NEFT transaction.

More About NEFT Timings

Earlier, the NEFT money transfer could only be processed in specific time slots, including:

But in December 2019, the RBI introduced a new NEFT payment system that stays active 24×7 and 365 days a year. This system has been put in place to promote digital transactions. From then onwards, a user can place an NEFT request round the clock. 

What is NEFT transfer limit?

A bank account holder can initiate an NEFT transfer starting from Re. 1 while there is no upper limit capped by the RBI. In general, there is no limit to the total amount a user can transfer via NEFT. However, certain banks might have set an upper limit depending on their internal guidelines. 

Charges applicable to NEFT transactions

In relation to NEFT transfer, you should know that:

• There are no charges for inward transactions at the bank branches for crediting a payment to the beneficiary account.
• Certain charges are applicable to the outward transactions at the bank branches where the transaction is initiated. These are as follows:

NEFT vs. UPI vs. RTGS comparison

Given below is a detailed comparison between NEFT, UPI, and RTGS:

Recommended Read: The Real Benefit of 0% MDR on UPI

FAQs

What is the full form of NEFT?

NEFT stands for National Electronic Funds Transfer.

Who can make a NEFT transfer?

The RBI provides a list of NEFT-enabled bank branches from where one can make NEFT money transfers at any time. As said above, an individual, corporate, or firm holding a bank account with the participating branch can make an NEFT transfer.

How to transfer funds through NEFT

A user needs to log in to his online banking account and add a beneficiary to initiate the NEFT transfer without having to visit the nearby bank branch.

What is the difference between RTGS and NEFT?

RTGS is a real-time payment transfer method that has a minimum transfer requirement of Rs. 2 lakh. NEFT, on the other hand, has no minimum amount criteria linked to it but it takes a few hours to settle the amount.

Does NEFT work for 24 hours?

Nowadays, NEFT transfer facility is available 24×7 on all days of the year, including bank holidays.

Can an NEFT transfer be initiated on Sunday?

One can initiate a fund transfer via NEFT on Sunday. However, the funds will be credited to the beneficiary only on the next working day.

Can NEFT be used to transfer funds outside India?

With this facility, funds can only be transferred to an account held with an NEFT-enabled bank branch in India.

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