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NEFT stands for National Electronic Funds Transfer. We often hear the word NEFT in the financial world but many have doubts about what is NEFT and how it works. NEFT is a country-wide electronic fund transfer system for sending money from one bank account to another account in a safe and hassle-free manner. NEFT allows the electronic transfer of funds or money from one bank account to another bank account. NEFT transactions are processed online. Reserve Bank of India and its customers are involved in NEFT transactions. All Indian Banks can participate in NEFT transactions.  

How NEFT Transactions Works?

To transfer money using NEFT, the remitter have to fill in the details of the recipient and should initiate the fund transfer.  Once the fund’s transfer was initiated, the originating bank prepares a message and sends the message to its pooling center, also called the National Electronic Funds Transfer Service Centre.   The pooling center forwards the message to the National Electronic Funds Transfer Clearing Centre, operated by the Reserve Bank of India, to be included in the next available batch. The Clearing Centre sorts the fund’s transfer transactions beneficiary bank-wise and prepares to account entries to receive funds from the originating banks (debit) and give the funds to the beneficiary banks (credit).

What is the Need for NEFT Transactions?

Generally, before the transactions were made online if a person wants to send money to another person, then he has to go to the bank where he has the account and there he has to transfer the money. But with the help of NEFT, they can be performed at any time at any place without being physically at the Bank which made the transaction process much easier and safe. Through NEFT transactions, money can be transferred at any time of the day which is very convenient.

NEFT transactions were introduced by RBI in November 2005. Before the NEFT was launched, Interbank Mobile Payment Service(IMPS) and Real Time Gross Settlement(RTGS) were the only two electronic modes of payment transfer in India. But a charge has to be paid by the people for every transaction done and the transactions too were only of high payments. So, to enable transactions with small amounts of money, NEFT was introduced which is very beneficial for retail customers. Initially, NEFT started with 5000 branches in nine cities in India. But now due to its good response and efficiency and convenient transactions, NEFT was now extended to 150000 Bank branches in India.

Changes Made After Getting Launched in the Indian Market

  • Before 2010, the maximum limit per transaction using NEFT used to be 100000 but in 2010, it was made to 200000.
  • In 2016, RBI enabled NEFT transactions to be done 24/7 and even on holidays too which provides accessibility and convenience.

Advantages of Using NEFT Transactions

  1. CONVENIENCE: As through NEFT, transactions can be done at any time and even on holidays, it is so convenient and can be done at any time without tension 
  2. SAFE AND SECURE: NEFT transactions are processed using a very secure and encrypted channel. As they were regulated by RBI they were safe and no information can be leaked.
  3. WIDE COVERAGE: NEFT was present in over 150000 bank branches across India which is a wide network and so people from any area can easily access the network.
  4. LOW TRANSACTION CHARGES: The charges taken by NEFT during a fund transfer are very low when compared to the remaining electronic fund transfer methods which are very beneficial to the customers.
  5. FAST PROCESSING: In NEFT, transactions are processed in batches at specific intervals throughout the day which enabled fast processing of transactions.
  6. GOOD FOR SMALL TRANSACTIONS: As NEFT enabled the transaction of small amounts of money, it is very beneficial to the retail customers 

Charges applied over an NEFT transaction always depend on the amount of money transferred. 

Current Charges of NEFT Transactions

Money transacted in INR

Charges Applied in INR

Up To 10,000

 Rs. 2.5

Between 10,000 to 1 Lakh

Rs.  5

Between 1 Lakh to 2 Lakh

Rs. 15

Equal to or More than 2 Lakh

Rs. 25

FAQs on NEFT Transactions

Q1. What is NEFT?

Ans: NEFT is an electronic fund transfer technique that allows the electronic transfer of funds or money from one bank account to another bank account. NEFT transactions are processed online. Reserve Bank of India and its customers are involved in NEFT transactions. All Indian Banks can participate in NEFT transactions.  

Q2. What are the operating hours of NEFT?

Ans: The NEFT system is available round the clock throughout the year on all days, i.e., on a 24x7x365 basis. NEFT presently operates in batches at half-hourly intervals throughout the day. In case of non-availability of NEFT for any reason, an appropriate message will be broadcasted by RBI to all system participants.

Q3. What are the advantages of the NEFT system?

Ans: The advantages of the NEFT system are convenient, safe, and secure, wide coverage, low transaction charges, fast processing, and good for small transactions.

Q4. How much time should I expect for the receipt of funds by the beneficiary?

Ans: A timeline of two hours from the batch settlement can be expected, within which the beneficiary’s account should be credited.

Q5. What happens if I write the wrong account number of the beneficiary?

Ans: The credit is given to the account number given by the remitter in the application. Credit to beneficiary account is released based on account number. It is the responsibility of the remitting customer to provide a correct account number. 


Last Updated : 13 Mar, 2023
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