What is NEFT (National Electronic Funds Transfer) and How Does NEFT Work?

In today’s fast-paced world, the need for quick and secure money transfers is more important than ever. Gone are the days of relying on cash or waiting for checks to clear. In India, NEFT (National Electronic Funds Transfer) has emerged as a popular and reliable solution for transferring funds electronically between bank accounts.

But what exactly is NEFT, and how can it benefit you?

This comprehensive guide will delve into everything you need to know about NEFT. We’ll explore its functionalities, advantages, and how it compares to other options like RTGS and IMPS. We’ll also provide a step-by-step guide on initiating NEFT transfers through various channels, ensuring you can confidently navigate the process. So, whether you’re a business owner, a freelancer, or someone who simply wants a convenient way to send money, NEFT offers a secure and efficient solution. Let’s dive in and unlock the power of NEFT!

What is NEFT?

NEFT stands for National Electronic Funds Transfer, and it was launched in the year 2005. It’s a system in India to transfer money between bank accounts electronically. You can use it to send money to someone else’s account, anywhere in India. It’s a secure and convenient way to send money, without needing to visit a bank branch.

Who Can Use NEFT?

NEFT is conveniently accessible to a wider range of users in India.

Here’s a breakdown of who can use NEFT for their money transfers:

• Account Holders: Individuals and businesses with savings or current accounts at any NEFT-enabled bank in India can initiate NEFT transfers. This is the most common scenario.
• Non-Account Holders (Limited): Even if you don’t have a bank account, you can still utilize NEFT for transfers up to ₹50,000 per transaction. You’ll need to visit a branch of any NEFT-enabled bank and deposit cash along with beneficiary details.

Advantages of NEFT

Here are some of the key advantages:

1. Faster Than Traditional Methods: NEFT offers a significant speed advantage over traditional methods like checks or money orders, with transfers typically completed within a few hours.
2. Cost Effective: NEFT is a cost-effective method as it does not require the beneficiary to pay transaction fees.
3. Security: NEFT secure electronic network regulated by the RBI, minimizing the risk of theft or loss associated with cash transfers.
4. Convenience: Initiate NEFT transfers 24/7 (depending on your bank) through internet banking, mobile banking, or even by visiting a branch. No need to carry cash or wait for checks to clear.
5. Wide Availability: NEFT is widely accepted across all NEFT-enabled banks in India, making it a versatile option for sending and receiving funds.

How NEFT Works? Step-by-Step Procedure

You, the initiator, provide your bank with the recipient’s bank account details (name, account number, IFSC code) and the transfer amount. Your bank then batches these requests with others and sends them electronically to a central clearing system operated by the RBI. This central system sorts the requests by destination bank and settles them throughout the day. Finally, the recipient’s bank receives the transfer instructions and credits the beneficiary’s account. This batch processing ensures smooth operation but may result in transfers taking a few hours to complete, unlike real-time options.

Here is the step-by-step process:

1. Initiation

You can initiate an NEFT by providing your bank with the beneficiary’s details, like the beneficiary’s name, bank name, branch name, account number, and IFSC (Indian Financial System Code). NEFT can be initiated through Internet banking, mobile banking or by visiting your branch.

2. Processing

After you initiate the transfer, the bank prepares a message containing the transaction details and forwards it to their NEFT Service Centre. These centres act as a pool to which NEFT payments are sent.

3. Batching

The NEFT Service Centre collects transactions that need to be settled into ‘batches’ for various banks. Batches are settled at about the same time every hour, helping set off and settle transactions efficiently. Batching facilitates the banks to settle transactions easily and handle large amounts of money.

4. Clearing and Settlement

The NEFT’s central system, designed, supplied, and managed by the RBI, receives transaction batches from all the service centres. It behaves like a clearinghouse, neutralising the batch of transactions based on the beneficiary’s bank. It directs settlement instructions to both the sender’s and the beneficiary’s banks.

5. Funds Movement

According to the settlement instructions, the sender’s bank begins a debit transaction and deducts the specified amount from their account. The RBI is in charge of a country’s financial stability, and these funds are transferred to it. 

6. Crediting Beneficiary

The RBI sends the funds to the beneficiary’s bank, which credits the specified amount to the beneficiary’s account. 

7. Confirmation

Both the sender and the beneficiary receive confirmation messages from their respective banks regarding successful NEFT transactions.

Details Required for NEFT Fund Transfer

The details required for an NEFT fund transfer are:

• The beneficiary’s name
• The bank account branch
• The bank account name
• The bank account number
• The IFSC Code
• The amount to be remitted

How to Transfer Money Through NEFT?

Here is the process you need to follow:

• Log in to your bank’s internet banking portal or mobile banking app. Alternatively, visit your bank’s branch to initiate the transfer.
• Navigate to the funds transfer section after you have logged in to your bank’s Internet banking portal or mobile application.
• Find “NEFT Transfer” or “National Electronic Funds Transfer”. 
• Fill in all the necessary details of the beneficiary, including his/her name, bank account number, IFSC of the bank branch, and the amount that needs to be transferred. 
•  Ensure the beneficiary’s details are accurate and complete to avoid potential errors.
• Double-check the beneficiary’s details and the transfer amount.
• Your bank may require you to provide security information like transaction passwords or one-time passwords to ensure the safety of your transaction.
• After verifying all necessary details, proceed to confirm the NEFT transfer request.
• Depending on your bank’s interface, you may be asked to review the transaction details before finalising the transfer.
• After confirming the NEFT transfer, you can expect to receive an acknowledgement or confirmation message indicating that the transfer request has been initiated successfully. 
• This acknowledgement usually includes a unique transaction reference number for tracking.
• You can monitor the status of your NEFT transfer through your bank’s internet banking portal or mobile app.
• Remember that NEFT transactions are processed in batches throughout the day. It may take a few hours for the transfer to be completed, depending on the timing of your request.
• Once the NEFT transfer is successfully processed, the recipient will receive the funds in his/her bank account.
• After successful processing, the recipient’s bank will promptly notify them of the credit transaction.

Read More About: How to Transfer Money through NEFT?

What Are the NEFT Charges? 

When you transfer funds electronically via NEFT, you might incur NEFT charges levied by your bank. These charges can vary depending on the nature of the transaction, the bank, and the type of account you hold.

Here are the potential NEFT charges:

1. Outward NEFT Charges: These are the fees that your bank charges to initiate an NEFT transfer. The charges typically range from ₹2.5 to ₹25 per transaction, depending on the bank and the transaction amount.
2. Inward NEFT Charges: Some banks may charge you for receiving funds via NEFT into your account. Many banks offer free inward NEFT transactions, especially for savings and current accounts.

The below table illustrates the potential NEFT charges:

Read More: NEFT Payment transaction and Service charges

What Is the NEFT Transfer Time?

The NEFT transactions vary with an online or bank branch operation. Online NEFT transfers may be done round-the-clock 24*7 and 365 days off all year. Bank branches follow a different schedule for NEFT timings. Generally, NEFT transactions can be operated on weekdays between 8 a.m. and 7 p.m. You cannot operate a transaction on the 2nd and 4th Saturdays, on Sundays and bank holidays. However, remember that each bank may have its cut-off times, influenced by internal policies and RBI guidelines.

Read More: Updated 2024 NEFT Transfer Timings and Holidays

Is There a NEFT Limit on Fund Transfers?

The Reserve Bank of India, the governing body for NEFT, doesn’t set any minimum or maximum limits on transfer amounts. This essentially means you can transfer any amount through NEFT. However, individual banks may impose limits based on risk perception and operational considerations.

Tips for Using NEFT

Here are some straightforward strategies to ensure your transactions flow easily:

• Double-check Beneficiary Details: Confirm the beneficiary’s name, account number, and IFSC code are entered accurately to avoid any issues. 
• Add the Beneficiary Beforehand: Adding recipients upfront through the Internet or mobile banking can save time (if your bank requires it).
• Schedule NEFT Transfers (if available): Some banks offer the choice to plan NEFT transfers for future dates, which can help with recurring payments. 
• Know the Transaction Limits: Some banks impose the NEFT transaction limit, remain aware of this and plan accordingly for larger transactions.
• Consider Transfer Timings: Though the NEFT transactions can be done 24/7, they are processed in batches. Initiate the transactions during banking hours to expedite the transaction.
• Review Transaction Fees: Depending on the bank and the amount you wish to transfer, be aware of the potential fees associated with NEFT transfers. Know your bank’s charges beforehand.
• Maintain Transaction Records: Save the confirmation of NEFT transfers for future reference. You may require it as evidence in case of a dispute.
• Use Secure Channels: Conduct NEFT transfers through authorised bank websites or mobile applications. This will prevent you from phishing and ensure a secure transaction.
• Beware of Unfamiliar Requests: Avoid initiating NEFT transfers for unknown individuals or companies to prevent potential fraud.
• Report Errors Promptly: In case of any issues, reach out to your bank immediately for assistance.

What Is the Difference Between NEFT, RTGS, and IMPS?

When you are running a business or managing finances, understanding the nuances of electronic funds transfer systems like NEFT, RTGS, and IMPS can be crucial.

The comparison mentioned in the table below will help you to understand the differences:

Here we have compared the NEFT with RTGS and IMPS for your reference but if you are confused between NEFT and UPI (unified payments interface), you can check out this guide on NEFT vs UPI for clarity.

Read More: RTGS vs NEFT – Which One Should You Use to Transfer Money

Conclusion 

We hope this article has helped you to properly understand NEFT’s meaning. It is the best and safest mode of transferring funds electronically. Utilise it as it comes with low charges, can accommodate large amounts of money, and can be conducted throughout the day. Use NEFT to ease funds transfers in your business operations or personal needs.

Frequently Asked Questions (FAQs)

1. Do all Banks Provide NEFT Service?

All major banks provide NEFT services. However, there may be some banks that do not offer transactions through NEFT.

2. How much time does it take to settle NEFT transactions?

NEFT transactions usually settle within 1-2 hours, although the exact time may vary depending on the bank’s processing time and the time of day the transfer has been initiated.

3. Can I make a NEFT transaction on the weekend?

Yes, NEFT transactions can be done on weekends. However, the availability of the service may vary depending on the bank and the processing timings.

4. Is NEFT available 24 * 7?

Yes, NEFT is available 24×7, except for bank holidays and Sundays, as per the recent RBI guidelines.

5. Can NEFT be Cancelled?

Yes, the sender can cancel NEFT transactions before they are settled. The cancellation request needs to be initiated by the sender’s bank, and it can be done either online or by visiting the bank branch.

6. What is NEFT’s full form?

NEFT stands for National Electronic Funds Transfer.

7. How to know the NEFT sender details?

To know the sender details in NEFT, one should know the sender’s bank account number and IFSC code.

8. How to fill out the NEFT form?

A basic NEFT form requires the date and the following critical information: 

• Your bank account details, including your account number, branch name, and IFSC code; 
• Beneficiary details, including their name, account number, and IFSC code; the amount to be transferred and finally, signing the form to approve the transaction.

9. How to check NEFT Status?

The answer to the question of how to check NEFT status is simple. Log in to your Internet banking account and navigate to the fund transfer section. The NEFT transaction status will provide updates or confirmations. Alternatively, contact your bank’s customer service for assistance.

10. Can I schedule NEFT transfers for a future date?

Yes, you can schedule it while adding the beneficiary for the NEFT transfer. 

11. Can I use NEFT to transfer funds internationally? 

No, NEFT cannot transfer funds internationally. It is a domestic electronic fund transfer system. 

12. How secure are NEFT transactions? 

NEFT transactions are secure as they are facilitated by the RBI and are conducted through a secure electronic payment system. 

13. What happens if I provide incorrect beneficiary details in an NEFT transfer? 

Failure to provide correct beneficiary details for an NEFT transfer leads to the crediting of funds to the wrong account or recipient. However, the amount will be returned to the originating bank within days. To retrieve your money, contact your bank immediately and provide the necessary information.

14. Are NEFT transactions subject to regulatory guidelines or limits set by the Reserve Bank of India (RBI)? 

Yes, NEFT is well-regulated according to the guidelines and limits offered by the RBI. The RBI NEFT Regulations, 2005, regulates the NEFT system.