Streamlining Electronic Fund Transfers for a Digital Era - National Electronic Funds Transfer

Introduction

The Banking Sector in India has modernized over time; people prefer digital banking to traditional banking. There are many banking facilities available to customers; one among the many facilities is NEFT. NEFT full form is National Electronic Funds Transfer. Here’s a complete guide on NEFT.

What is the Full Form of NEFT?

NEFT Full Form stands for National Electronic Fund Transfer. As the name suggests, it is a banking facility provided to customers for online transactions.

Overview of NEFT

The Reserve Bank of India introduced NEFT in November 2005. The NEFT system has gained popularity over the years, and the number of people opting for digital payments is growing significantly. This scheme allows individuals or firms to transfer funds to any bank in the country. Some banks offer NEFT facilities in their mobile net banking applications, such as ICICI Bank, SBI, HDFC Bank, and PNB.

The total NEFT transactions performed in June 2023 is ₹3039490.65 (lakhs).

Historical Background and Evolution of NEFT in the Banking Industry

RBI introduced NEFT in November 2005. Since then, digital payments have revolutionized in India. Earlier people used to avoid using online payment methods because of security concerns, but now every bank account holder in India uses mobile banking for payments. Customers now transfer money electronically via NEFT, this payment method helps customers to make payments whenever necessary.

Significance and benefits of NEFT for individuals and businesses

A. NEFT as a mode of payment is much safer and quicker than other methods of payment.
B. By adopting NEFT, you can save time and other valuable resources.
C. NEFT provides transparency to both parties, as both the beneficiary and the benefactor can oversee the payment process.

NEFT Meaning and NEFT Process

As NEFT’s full form (National Electronic Fund Transfer) suggests, it is the most effective method of transferring money electronically. Transferring money via NEFT is very convenient; instead of writing a check or withdrawing cash and preparing a demand draft, an individual can transfer funds simply through NEFT by following a series of steps.

Here are the steps to follow for money transfer through NEFT:

Step 1:

Using your credentials, Log in to your mobile banking account

Step 2:

On the homepage, click Fund Transfer, then select NEFT as the transfer method.

Step 3:

Select ‘Add new Payee’ and add the beneficiary as the payee.

To add a new payee, you need to fill in these details about the beneficiary:

• Account Number
• Name
• IFSC Code
• Account type
• Name of the bank/branch

Step 4:

Once the beneficiary is connected successfully, enter the amount.

Step 5:

Click Confirm to initiate the transaction.

Role of participating banks and the Reserve Bank of India

NEFT is the most commonly used transfer method among the three options available- NEFT, RTGS, and IMPS. Banks follow the guidelines issued by RBI to transfer funds within or outside the branch. RBI has authorized banks to carry out NEFT transactions; these are the few banks providing NEFT facilities:

HDFC Bank Limited	ICICI Bank Limited	Indian Bank
Axis Bank Limited	Bank of India	Bank of Baroda
Canara Bank	Punjab National Bank	State Bank of India

RBI plays an important role in the development of digital banking. RBI regulates the payment system and supervises proper management of banks.

NEFT Transfer Timings

Earlier, there were restrictions for NEFT payments. Monday to Friday, 8 AM to 6:30 PM, whereas on Saturdays, 8 AM to 12 PM.

After December 2019, there is no time limit on NEFT transfers. The NEFT facility is now accessible to users 24*7, 365 days a year.  NEFT facility is available throughout the day in 30 min slots; If you request a transaction at 10:00 AM, it is processed by 10:30 AM.

NEFT Features and Advantages

Availability and Accessibility

An individual or firm can use this facility 24*7, 365 days a year. A user can transfer funds through net banking or traditional banking. You can make payments simply by logging in to your mobile banking application.

Security and Safety Measures

NEFT transactions are safe and secure, as RBI regulates and operates the transaction process. There are a series of authentication steps to avoid any fraudulent activity. 

Cost-Effectiveness

RBI has discarded transaction fees on NEFT through mobile banking to promote digital transactions in India. Even while transferring money by visiting a bank, transaction charges are minimal.

NEFT Registration and Usage

Registering for NEFT Services

Any individual, firm, or corporation can register themselves to transfer funds via NEFT to any other person or business in the country. However, If someone does not have a bank account, in that case, they can transfer money by visiting a bank. The transaction limit for such transfers is up to ₹ 50,000.

Initiating NEFT Transactions

Customers can initiate NEFT transactions through their mobile banking applications. RBI does not let any NEFT charges for online transactions through net banking. This process can be initiated by any individual or corporation from the comfort of their home. Any business or corporation can register itself with a bank to initiate the NEFT transaction process. After the registration, the corporation can form a 4-digit security pin for making payments safely.

Beneficiary Management

A beneficiary is someone who receives payments and other benefits from the benefactor. To transfer funds via net banking you have to add the beneficiary as the payee. Banks may take 30 mins to 3 hrs to approve someone as a beneficiary. You can add as many beneficiaries as you want in your mobile banking application.

Every transaction has a Unique Transaction Reference Number (UTR); this number helps in tracking NEFT transaction status. You can track the transaction by contacting the NEFT Customer Facilitation Center of their respective banks. The customer must provide details related to their NEFT transaction, such as the UTR (Unique Transfer Reference) Number and date of transaction.

NEFT Limits and NEFT Charges

NEFT Transaction Limits

There is no upper or lower limit on NEFT transactions. You can transfer a minimum amount of ₹1, and the maximum can go up to the customer’s wish. However, for cash-based transfers, the transaction limit is ₹50,000.

NEFT  Charges

RBI does not charge any transaction fees for inward transactions. However, for outward transactions, the maximum fees a bank can charge are given below:

Maximum of Rs. 2.50 (+ GST) for transfers up to Rs. 10,000.
Maximum of Rs. 5 (+ GST) for transfers above Rs. 10,000 and less than Rs. 1 Lakh.
Maximum of Rs. 15 (+ GST) for transfers above Rs. 1 Lakh and less than Rs. 2 Lakh
Maximum of Rs. 25 (+ GST) for transfers above Rs. 2 Lakh.

IMPS VS NEFT

Meaning: 

IMPS stands for Immediate Payment Service, which allows real-time money transfers facilitated by NPCI (National Payment Corporation of India), launched in 2010.

Transaction Charges: 

IMPS charges start from Rupees 5 per transaction and go up to Rupees 15. Whereas RBI has scrapped charges levied on NEFT transactions made online.

Timings:

IMPS, as the name suggests, transfers money immediately. Whereas NEFT can take up to 2 hours to process the transaction.

Maximum Fund Transfer Limit:

The maximum transfer limit for NEFT varies from bank to bank. However, the maximum transfer limit for IMPS is  ₹2,00,000 per day.

Service Availability:

IMPS and NEFT are available to customers 24*7; customers can access this facility anytime via a mobile banking application.

Recent Developments and Future of NEFT

The Indian banking system and technological advancement go hand in hand. The evolution of money started when currency replaced the barter system. Since then, Indian banks have come a long way.

NEFT has changed the digital payments scenario in India.

1. Enhancement of NEFT Services

Earlier, customers could only transfer money during bank hours, but now you can access any banking facility in your mobile applications. NEFT is available to users 24/7, even on weekends and bank holidays.

2. Technological Advancements

RBI promotes technological advancements and adopts innovative policies for the development of digital banking. RBI has adopted Blockchain Technology to facilitate safe NEFT transactions; Blockchain Technology is a ledger that records transactions in a way that is safe and impossible to hack.

3. Potential Challenges and Improvements

NEFT and digital banking have faced many challenges in the early years of establishment. Net banking did not provide the personal touch of a banker, theft of password/PIN, and personal information. Now, the digital banking sector has seen rapid growth in recent times. According to RBI’s annual report, NEFT’s transaction volume increased by 30.8%.

Conclusion

NEFT is not a facility but a requirement in today’s society. It enables people to make payments from the comfort of their homes. NEFT is a convenient method of sending and receiving money electronically.  This mode of payment is useful for businesses that must transfer large funds regularly or individuals with similar requirements. NEFT’s most significant advantage is that it does not place an upper limit on the transaction amounts, and there is no NEFT timing as per the new mandate. Now anyone can make NEFT transactions even on weekends, and it is a safe and cost-effective method of transferring funds around the country.

Learn more about some other full forms:

KYC Full Form	PF Full Form
UTR Full Form	BSF Full Form
NPCI Full Form	APBS Full Form
GNP Full Form	GPF Full Form
FII Full Form	IDBI Full Form

NEFT Full Form: FAQs