National Electronic Funds Transfer

Last updated

National Electronic Funds Transfer (NEFT) is an electronic funds transfer system maintained by the Reserve Bank of India (RBI). Started in November 2005, the setup was established and maintained by Institute for Development and Research in Banking Technology. [1] NEFT enables bank customers in India to transfer funds between any two NEFT-enabled bank accounts on a one-to-one basis. It is done via electronic messages.

Contents

Unlike real-time gross settlement, fund transfers through the NEFT system do not occur in real-time basis. Previously, NEFT system settled fund transfers in hourly batches with 23 settlements occurring between 00:30 hrs. to 00:00 hrs.

From 16 December 2019, there would be 48 half-hourly batches occurring between 00.30 am to 00:00 am every day regardless of a holiday or otherwise, [2]

As of 30 November 2019, NEFT facilities were available at 1,48,477 branches/offices of 216 banks across the country and online through the website of NEFT-enabled banks. NEFT has gained popularity due to the ease and efficiency with which the transactions can be concluded.[ citation needed ]

There is no limit – either minimum or maximum – on the amount of funds that can be transferred using NEFT. [3]

Process

Detailed process of NEFT is as follows: [4] [5]

  1. The customer fills up 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 available through online banking, and some banks also offer the NEFT facility through ATMs.
  2. The originating bank branch prepares a message and sends the message to its pooling centre (also called the NEFT Service Centre).
  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.
  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).
  5. The destination banks receive the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary customers’ accounts.

Settlement timings

NEFT transfers are settled in half-hourly batches every day between 00:30 am and 00:00 am all through the year.

NEFT originally settled fund transfers in hourly batches. [6] The RBI reduced clearance times to half-hourly batches in April 2016. [7] In August 2019, the RBI announced that it would enable round-the-clock settlements from 16 December 2019. [8] [9]

Service charges for NEFT transactions

The structure of charges is as follows:

Inward transactions at destination bank branches (for credit to beneficiary accounts):

Outward transactions at originating bank branches (charges for the remitter):

- For transactions up to ₹ 10,000 : not exceeding ₹ 2.50 (+ Applicable GST)

- For transactions above ₹ 10,000 up to ₹ 1 lakh : not exceeding ₹ 5 (+ Applicable GST)

- For transactions above ₹ 1 lakh and up to ₹ 2 lakhs : not exceeding ₹ 15 (+ Applicable GST)

- For transactions above ₹ 2 lakhs : not exceeding ₹ 25 (+ Applicable GST)

The scenario varies from bank to bank, whether they levy this charge or not immatter of the transaction done online or offline for the accounts other than a savings bank account.

The RBI announced on 11 June 2019 that all charges for NEFT and real-time gross settlement transactions collected from banks would be waived from 1 July 2019, and asked banks to pass on the benefits to customers (so RBI charges nothing for these transactions to its member banks & the only charge that's levied is by the bank through which the outward transaction is initiated). [10]

Statistics

216.71 million National Electronic Funds Transfers transactions worth ₹1,811,780.90 crore (equivalent to ₹22 trillionorUS$280.78 billion in 2023) [11] were made in September 2019, as against 661 million transactions worth ₹44 trillion (US$550 billion) the entire year 2013–15. [12]

Related Research Articles

<span class="mw-page-title-main">Reserve Bank of India</span> Central bank of India

The Reserve Bank of India, abbreviated as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for the control, issue and maintaining supply of the Indian rupee. It also manages the country's main payment systems and works to promote its economic development. Bharatiya Reserve Bank Note Mudran (BRBNM) is a specialised division of RBI through which it prints and mints Indian currency notes (INR) in four of its currency printing presses located in Nashik, Dewas, Mysore and Salboni. The RBI established the National Payments Corporation of India as one of its specialised division to regulate the payment and settlement systems in India. Deposit Insurance and Credit Guarantee Corporation was established by RBI as one of its specialised division for the purpose of providing insurance of deposits and guaranteeing of credit facilities to all Indian banks.

In the United States, the ACH Network is the national automated clearing house (ACH) for electronic funds transfers established in the 1960s and 1970s. It processes financial transactions for consumers, businesses, and federal, state, and local governments. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit for payroll, Social Security and other benefit payments, tax refunds, and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills.

<span class="mw-page-title-main">Transaction account</span> Bank holding that clients can access on demand

A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account or bank account held at a bank or other financial institution. It is available to the account owner "on demand" and is available for frequent and immediate access by the account owner or to others as the account owner may direct. Access may be in a variety of ways, such as cash withdrawals, use of debit cards, cheques and electronic transfer. In economic terms, the funds held in a transaction account are regarded as liquid funds. In accounting terms, they are considered as cash.

<span class="mw-page-title-main">Wire transfer</span> Electronic funds transfer

Wire transfer, bank transfer, or credit transfer, is a method of electronic funds transfer from one person or entity to another. A wire transfer can be made from one bank account to another bank account, or through a transfer of cash at a cash office.

<span class="mw-page-title-main">Giro (banking)</span> Payment transfer from one bank account to another bank account and initiated by the payer

A giro transfer, often shortened to giro, is a payment transfer from one current bank account to another bank account and initiated by the payer, not the payee. The debit card has a similar model. Giros are primarily used in Europe; although electronic payment systems exist in the United States, it is not possible to perform third-party transfers with them. In the European Union, there is the Single Euro Payments Area (SEPA), which allows electronic giro or debit card payments in euros to be executed to any euro bank account in the area.

<span class="mw-page-title-main">Cheque</span> Method of payment

A cheque, or check, is a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The person writing the cheque, known as the drawer, has a transaction banking account where the money is held. The drawer writes various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay the amount of money stated to the payee.

A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, payment instruments such as payment cards, people, rules, procedures, standards, and technologies that make its exchange possible. A common type of payment system, called an operational network, links bank accounts and provides for monetary exchange using bank deposits. Some payment systems also include credit mechanisms, which are essentially a different aspect of payment.

<span class="mw-page-title-main">National Financial Switch</span>

National Financial Switch (NFS) is the largest network of shared automated teller machines (ATMs) in India. It was designed, developed and deployed by the Institute for Development and Research in Banking Technology (IDRBT) in 2004, with the goal of inter-connecting the ATMs in the country and facilitating convenience banking. It is run by the National Payments Corporation of India (NPCI). As on 31st January’ 22, there were 1,203 members that includes 111 Direct, 1,045 Sub members, 43 RRBs and 4 WLAOs using NFS network connected to more than 2.55 Lac ATM (including cash deposit machines/recyclers).

Payment and Settlement Systems are used for financial transactions in India. Covered by the Payment and Settlement Systems Act of 2007, legislated in December 2007, they are regulated by the Reserve Bank of India (RBI) and the Board for Regulation and Supervision of Payment and Settlement Systems.

The Indian Financial System Code is an alphanumeric code that facilitates electronic funds transfer in India. A code uniquely identifies each bank branch participating in the three main Payment and settlement systems in India: the National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) and Immediate Payment Service (IMPS) systems.

The National Payments Corporation of India is an umbrella organization for operating retail payments and settlement systems in India, is an initiative of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India. It was created by RBI for operating retail payments and settlement systems in India.

<span class="mw-page-title-main">Immediate Payment Service</span> Electronic funds transfer system in India

Immediate Payment Service (IMPS) is an instant payment inter-bank electronic funds transfer system in India. IMPS offers an inter-bank electronic fund transfer service through mobile phones. The service is available 24x7 throughout the year including bank holidays. NEFT was also made available 24x7 from December 2019. RTGS was also made available 24x7 from 14 December 2020.

Mobile payments is a mode of payment using mobile phones. Instead of using methods like cash, cheque, and credit card, a customer can use a mobile phone to transfer money or to pay for goods and services. A customer can transfer money or pay for goods and services by sending an SMS, using a Java application over GPRS, a WAP service, over IVR or other mobile communication technologies. In India, this service is bank-led. Customers wishing to avail themselves of this service will have to register with banks which provide this service. Currently, this service is being offered by several major banks and is expected to grow further. Mobile Payment Forum of India (MPFI) is the umbrella organisation which is responsible for deploying mobile payments in India.

Direct Benefit Transfer or DBT is an attempt to change the mechanism of transferring subsidies launched by Government of India on 1 January 2013. This scheme or program aims to establish a Giro system to transfer subsidies directly to the people through their linked bank accounts. It is hoped that crediting subsidies into bank accounts will reduce leakages, duplicity and delay and the new processes will increase transparency and accountability.

<span class="mw-page-title-main">Unified Payments Interface</span> Indian interbank transfer system

The Unified Payments Interface (UPI) is an instant payment system developed in India, by the National Payments Corporation of India (NPCI). The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It is used on mobile devices to instantly transfer funds between two bank accounts. The mobile number of the device is required to be registered with the bank. The UPI ID of the recipient can be used to transfer money. It runs as an open source application programming interface (API) on top of the Immediate Payment Service (IMPS), and is regulated by the Reserve Bank of India (RBI). Indian Banks started making their UPI-enabled apps available on the Google Play Store on 25 August 2016. It is widely considered to be one of the most successful payment systems in the world, in terms of the number of users, the volume of transactions, and the number of transactions.

MT202 COV is a specific SWIFT message type used on the SWIFT network for financial institution (FI) funds transfer between financial institutions.

<span class="mw-page-title-main">Airtel Payments Bank</span> Indian Payments Bank

Airtel Payments Bank is an Indian payments bank with its headquarters in New Delhi. The company is a subsidiary of Bharti Airtel. On 5 January 2022, it was granted the scheduled bank status by Reserve Bank of India under second schedule of RBI Act, 1934.

Paytm Payments Bank 509145261 (PPBL) is an Indian payments bank, founded in 2017 and headquartered in Noida and is part of mobile payment company paytm. In the same year, it received the license to run a payments bank from the Reserve Bank of India and was launched in November 2017. In 2021, the bank received a scheduled bank status from the RBI.

National Automated Clearing House regional ECS into one National Payment System, is claimed to be better than its predecessor, Electronic Clearing Service.

An automated clearing house (ACH) is a computer-based electronic network for processing transactions, usually domestic low value payments, between participating financial institutions. It may support both credit transfers and direct debits. The ACH system is designed to process batches of payments containing numerous transactions, and it charges fees low enough to encourage its use for low value payments.

References

  1. ↑ "Overview of Payment Systems in India". Reserve Bank of India. Retrieved 24 January 2015.
  2. ↑ "Reserve Bank of India - Notifications". www.rbi.org.in. Retrieved 11 December 2019.
  3. ↑ "Reserve Bank of India". www.rbi.org.in. Retrieved 11 December 2019.
  4. ↑ "FAQ- NEFT System". Reserve Bank of India. 28 April 2020. Retrieved 8 May 2021.
  5. ↑ "National Electronic Funds Transfer System - Procedural Guidelines". Reserve Bank of India. Retrieved 24 January 2015.
  6. ↑ "NEFT Fund Transfer To Get Faster - NDTV". NDTV. Retrieved 6 April 2017.
  7. ↑ "NEFT transfer to get quicker as RBI cuts clearance time". The Indian Express. 6 April 2016. Retrieved 6 April 2017.
  8. ↑ Manikandan, Ashwin (7 August 2019). "Transact round the clock: NEFT timings to change from December, RBI announces". The Economic Times. Retrieved 7 August 2019.
  9. ↑ "RBI allows round-the-clock fund transfers under NEFT from December". The Hindu. 7 August 2019. Retrieved 7 August 2019.
  10. ↑ "Fund transfers via RTGS, NEFT to cost less from July 1". The Times of India.
  11. ↑ "ECS - All Centres' Transaction Details for the month of August 2019" (PDF). rbidocs.rbi.org.in. RBI. Archived (PDF) from the original on 12 December 2019. Retrieved 12 December 2019.
  12. ↑ "Digital India: Beyond an aspiration to an imperative", Business Today , 26 February 2016
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.