NEFT stands for National Electronic Funds Transfer and was launched in 2005. It enables easy fund transfers between two parties, as long as both parties have a NEFT-enabled bank account.
During the financial years of 2015 and 2016, customers made over 928 million transactions using NEFT. The total value of these transactions was USD 830 billion. However, since the launch of more consumer-centric payment solutions like IMPS and UPI, fewer consumers are using NEFT to facilitate their transactions. Let us explore everything there is to know about NEFT.
How to carry out a NEFT transaction
In order to initiate and successfully conduct a NEFT transaction, customers need to follow these steps:
- Fill an application form that provides all the necessary details about the beneficiary. As a general rule, these details include the name of the beneficiary, the bank the beneficiary operates with, the IFSC code, account number, and account type
- You must then enter the amount that you want to transfer to the beneficiary
- Depending on the bank that you operate with, you may have to verify your identity by entering a PIN, OTP, or by following any other verification means as specified by the bank
Once these steps are followed, the bank authorizes the payment.
What happens when the bank authorizes a NEFT payment?
NEFT payments occur in hourly batches. Thus, depending on the way the bank operates, your beneficiary may receive the payment within a set number of hours. The following process takes place when the bank authorizes the NEFT payment:
- Your bank branch will prepare a standard message regarding the details of the transaction. They will send this message to a pooling center. Pooling centers are also known as the NEFT Service Centers
- The pooling center will then forward the same message to the NEFT Clearing Center. This center is operated and maintained by the Reserve Bank of India (RBI) through their National Clearing Cell located in Mumbai. The message ensures that the payment is included in the upcoming batch (as payments occur in hourly batches)
- The Clearing Center then starts to sort through all the different requests for payments. These payments are initially sorted bank-wise. The center then creates accounting entries that specify the amount of money that needs to come from the originating bank. For instance, if you have initiated a payment of Rs 2 lakh, then the center will create an accounting entry stating that your bank must pay Rs 2 lakh. The remittance messages are then sent to the destination banks through their pooling centers
- Once the destination bank receives the information, it forwards the message to the beneficiary’s account
The transfer takes place once all of these steps are completed.
What are the service charges for transactions made through NEFT?
Transactions coming inward are free. However, there are specific services charges for outward transactions that vary with the transaction amount. The following table shows the different payment slabs and their corresponding services charges:
|Transaction amount||Service charge levied|
|Up to Rs 10,000||Rs 2.50 + GST|
|Between Rs 10,000 and Rs 1,00,000||Rs 5 + GST|
|Between Rs 1,00,000 and Rs 2,00,000||Rs 15 + GST|
|Over Rs 2,00,000||Rs 25 + GST|
Who can use NEFT to transfer funds?
Any individual, corporate or firm can use NEFT if they have a bank account. Individuals who do not have a bank account can drop their funds at any NEFT-enabled ATM near them. In such cases, individual customers are given a specific NEFT code.
Similarly, any individual, corporate or firm can receive payments that are initiated through NEFT. This payment scheme is also commonly used to transfer money between India and Nepal. It even converts the amount sent from Indian rupees into Nepalese rupees for the convenience of the consumer.
These days, though, most individual consumers and corporate companies prefer using IMPS-enabled platforms or UPI platforms to transfer funds. This is mainly because these platforms are much quicker and offer myriad business-oriented features that add value.
What are the charges for NEFT transactions?
None! As a means to promote digital transactions, RBI has scrapped transaction fees for all NEFT transactions, irrespective of your bank.
What else can you do with NEFT?
Another feature of NEFT that has been quite helpful to customers is that you can pay any credit card dues through this payment system, if required. The NEFT system has a different transaction code built into it to enable payments to the card issuing banks. You will need this code, along with the IFSC code of the bank, in order to make these payments. You can get the code from your bank branch.
NEFT payments round the clock
From December 2019 onwards, consumers will be able to make NEFT payments all through the day and night, instead of the existing 8 am to 7 pm window.
One of the biggest plus points of NEFT is that there are no upper limits on the transactions, allowing customers to send money as required. This can be a huge boon for customers facing any medical or financial emergency and needing large sums of money to deal with the same. NEFT fund transfers are quicker than RTGS transfers, which is another major plus.