NEFT : Works, Features, Advantages, Timing, Limit & Charges

What is NEFT?

NEFT, or National Electronic Funds Transfer, is an electronic payment system introduced by the Reserve Bank of India (RBI) in November 2005. It serves as a convenient and secure method for electronically transferring funds between bank accounts across India. Operating on a deferred net settlement (DNS) basis, NEFT processes transactions in batches at scheduled intervals throughout the day. This system enables seamless and efficient fund transfers, enhancing the overall banking experience for individuals and businesses alike.

Geeky Takeaways:

• NEFT, introduced by RBI, expedites and simplifies money transfers between banks.
• NEFT operates on a deferred net settlement (DNS basis) and settles transactions in secure batches, ensuring efficient fund transfers.
• NEFT offers 24×7 fund transfer availability, enhancing user convenience.
• NEFT transactions are user-friendly through internet banking, mobile banking, and in-branch services, providing flexibility and accessibility.
• NEFT assures secure and transparent transactions, updating users in real time through confirmation messages or notifications.

How NEFT Work?

1. Sender logs in to their net banking account.

2. Sender adds the beneficiary’s details (name, account number, IFSC code).

3. Beneficiary details are validated by the bank

4. Sender initiates NEFT transfer, specifying the amount and remarks.

5. Transaction details are sent to the NEFT clearing centers in batches.

6. NEFT clearing centers process and batch the transactions.

7. Settlement files are sent to the respective banks for fund transfer.

8. Funds are credited to the beneficiary’s account once settlement is completed.

9. Confirmation messages or notifications are sent to both the sender and recipient.

10. The sender can track the transaction through various banking channels.

Features of NEFT

1. Round-the-Clock Availability: NEFT offers the convenience of 24×7 availability, allowing users to transfer funds at any time of the day or night. This gives people freedom and ease of access, so they can do business whenever it’s convenient for them, regardless of banking hours.

2. Near Real-Time Transfer: NEFT makes it possible to send money to a beneficiary’s account almost instantly. The transfer itself may take a few minutes to complete, but the receiver usually has quick access to the money right away. This makes sure that transfers are quick and easy.

3. Pan-India Coverage: NEFT covers branches of all types of banks across India. This widespread coverage ensures that users can initiate fund transfers to beneficiaries located in various parts of the country, making NEFT a universally accessible payment solution.

4. Positive Confirmation: Senders get proof via SMS or email when the money has been successfully credited to the recipient’s account. This feature provides users with reassurance and transparency, keeping them informed about the status of their transactions in real time.

5. Penal Interest Provision: NEFT provides a provision to charge late fees and interest on transactions that are credited or returned late. This system gives banks a reason to process deals quickly and holds them responsible if there are any delays or mistakes.

6. No Charges for Savings Account Customers: Customers who have a savings account can do NEFT transfers online for free. Because of this, individuals are more likely to use NEFT to transfer money without having to pay extra. This makes it an inexpensive and simple means to do banking transactions.

Advantages of NEFT

1. Available 24×7: NEFT operates round-the-clock, providing users with the flexibility to initiate fund transfers at any time, even outside traditional banking hours. This ensures convenience and accessibility for users, allowing them to conduct transactions according to their schedules.

2. Secure and Reliable Fund Transfer Mechanism: NEFT offers a secure and reliable platform for fund transfers, ensuring that transactions are processed safely and efficiently. Users can use NEFT to send and receive money without worrying about safety because it has strict security guidelines.

3. Pan-India Accessibility: NEFT has a large network that includes banks all over India, so people in both cities and remote places can use it. This wide reach makes it possible for users to easily send money to people across the country.

4. Real-Time Confirmation: When the money is successfully sent to the recipient’s account, the sender gets real-time proof by SMS or email. This quick message gives users peace of mind and openness by immediately letting them know the state of their transactions.

5. Flexible Usage: NEFT is more than just a way to send money to someone else. Users can use the tool to do many things, like pay their credit card bills, loan EMIs, and more. Because it can be used in so many ways, NEFT is a comprehensive solution for financial transactions.

How NEFT System Operate?

1. Initiation: The NEFT transaction begins when the senders initiate the transfer through Internet banking, mobile banking, or by visiting the bank branch. The sender provides the necessary details such as the beneficiary’s account number, IFSC code, and the amount to be transferred.

2. Message Transfer: Once initiated, the transaction details are sent by the originating bank to its pooling center. From there, the details are forwarded to the NEFT Clearing Center, which acts as an intermediary for processing NEFT transactions.

3. Clearing and Settlement: The NEFT Clearing Centre sorts and gets ready the transaction details so they can be entered into the books. The center then facilitates the settlement of transactions between participating banks. The steps in this process make sure that money is sent quickly and safely.

4. Credit to Beneficiary: The beneficiary bank adds the money to the receiver’s account as soon as it gets the transfer messages from the NEFT Clearing Centre. The recipient receives information about the successful transaction once the credit is processed. This step finishes the NEFT transfer process and makes sure that the money gets sent from the sender to the receiver.

Who can use NEFT?

1. Individuals: NEFT can be used to send money to anyone with a bank account at a bank that is part of the NEFT network. NEFT makes it easy and safe for people to send and receive money for personal transactions, bill payments, and other financial needs.

2. Business, Corporates, and Companies: Businesses ranging from small firms to Large corporations, multinational companies, and organizations of all sizes can use NEFT to make payments to vendors, suppliers, and employees. NEFT makes it easy to manage business transactions, ensuring timely and efficient fund transfers.

3. Government Entities: Government departments and agencies can also utilize NEFT for making payments, disbursing benefits, and collecting taxes. Because NEFT is safe and quick, it is the chosen method for government transactions, which helps make financial operations run more smoothly.

4. Non-profit Organisations: NEFT can be used by charities, NGOs, and other non-profit entities to accept donations, send money to welfare programs, and keep track of their operational expenses. NEFT makes financial transactions clear and accountable, which is in line with the principles of non-profit governance.

5. Financial Institutions: Banks, financial institutions, and cooperative societies that are part of the NEFT network can facilitate fund transfers for their customers. These institutions play a crucial role in enabling individuals and businesses to access NEFT services seamlessly.

How to Initiate NEFT Transaction?

1. Internet Banking: Users can initiate NEFT transactions conveniently through the bank’s internet banking portal. After logging in, they can go to the fund transfer section and select the NEFT option. They need to provide the beneficiary details, such as account number, IFSC code, and transfer amount, and confirm the transaction.

2. Mobile Banking: Many banks offer mobile banking applications that allow users to perform various banking transactions, including NEFT transfers, from their smartphones. Users can open the mobile app, go to the fund transfer section, select NEFT, and enter the necessary details to complete the transaction securely.

3. Bank Branch: NEFT transactions can be initiated by visiting the nearest bank branch. Customers need to fill out the NEFT application form provided by the bank, providing details such as the beneficiary’s account number, IFSC code, transfer amount, and other required information. Bank staff will assist in processing the transaction and ensure its completion.

Information Required to Transfer Funds through NEFT

To initiate a NEFT transfer, the following information is required:

1. Beneficiary’s Name

2. Beneficiary’s Account Number and Type

3. Beneficiary Bank Name and Branch

4. Beneficiary Bank’s IFSC Code

NEFT Timings

NEFT, or National Electronic Funds Transfer, operates on a 24×7 basis, providing users with the flexibility to initiate transactions at any time, including holidays and weekends. The system settles transactions every half hour throughout the day and night. This means that transactions are grouped together and settled periodically, rather than processed individually in real-time. For example, if a transaction is initiated at any point during the day, it will be included in the next available batch for processing. These batches are scheduled at regular intervals, ensuring that transactions are processed efficiently and promptly. As a result, funds transferred through NEFT are typically credited to the beneficiary’s account within a short timeframe, making it a convenient option for users requiring timely fund transfers. The round-the-clock availability and batch-wise processing of transactions contribute to the accessibility and efficiency of the NEFT system, enabling seamless electronic fund transfers for individuals, businesses, and organizations across the country, at any time of the day or night.

NEFT Transfer Limit

While there is no specific limit set by the RBI, individual banks may impose their own limits based on their risk perception. the transfer limits for NEFT transactions can vary across different banks. Here’s a table illustrating the NEFT transfer limits for some major banks:

Bank	NEFT Transfer Limit (Approximate)
State Bank of India	Up to ₹25 lakhs
ICICI Bank	Up to ₹10 lakhs
HDFC Bank	Up to ₹25 lakhs
Axis Bank	Up to ₹25 lakhs
Kotak Mahindra Bank	Up to ₹10 lakhs
Punjab National Bank	Up to ₹10 lakhs
Bank of Baroda	Up to ₹25 lakhs
Canara Bank	Up to ₹10 lakhs
IDBI Bank	Up to ₹10 lakhs
Union Bank	Up to ₹10 lakhs
Yes Bank	Up to ₹5 lakhs

Customer Charges Levied by Bank for NEFT Transactions

The charges levied by banks for outward NEFT transactions are capped by the RBI. The charges depend on the transaction amount,

Transaction Amount	Charges (Plus Applicable GST)
Up to ₹10,000	₹2.50
₹10,001 to ₹1 Lakh	₹5.00
₹1,00,001 to ₹2 Lakh	₹15.00
Above ₹2 Lakh	₹25.00

Difference between NEFT, UPI, and RTGS

Basis	NEFT	UPI	RTGS
Maximum Transfer Value	There is no maximum limit imposed on the transfer value for NEFT, allowing users to transfer any amount	UPI transactions are capped ₹2 lakh per transaction, providing a limit for individuals to transfer	RTGS does not impose any maximum limit on the transfer value, enabling high-value transactions
Minimum Transfer Value	NEFT transactions can be initiated with a minimum transfer value of ₹1, facilitating small-value transfers	UPI transactions have a minimum transfer value of ₹1, allowing users to transfer small amounts conveniently	RTGS require a minimum transfer value of ₹2 lakh, making it suitable for high-value transfer
Transfer Timing	NEFT transactions are processed in batches at a half-hourly intervals, with funds typically credited within 30 minutes to 2 hours	UPI transactions are immediate, with funds transferred instantly to the beneficiary’s account	RTGS transactions are also immediate, providing real-time settlement of funds between accounts
Payment Mode	NEFT transactions can be initiated both online (through internet banking) and offline (at bank branches)	UPI transactions are primarily conducted online mobile apps	Similar to NEFT, RTGS transactions can be initiated both online and Offline
Details Required	Account number and IFSC Code	VPA of beneficiary, QR Code, or Account number and IFSC	Account number and IFSC Code
Beneficiary Registration	Beneficiary needs to be registered in advance to receive funds through NEFT transaction	UPI transaction do not require beneficiary registration	Beneficiary’s need to be registered in advance to receive funds through RTGS

Frequently Asked Questions (FAQs)

1. What is NEFT?

Answer:

NEFT stands for National Electronic Funds Transfer, an electronic fund transfer system introduced by the Reserve Bank of India.

2. Is IFSC code a must for all NEFT transactions?

Answer:

Yes, providing the IFSC code is mandatory for initiating NEFT transactions.

3. Do all banks have NEFT facility?

Answer:

No, not all banks are part of the NEFT network.

4. Is NEFT transfer immediate?

Answer:

Yes, NEFT transfers are processed in near real-time, providing immediate access to funds.

5. What is the NEFT limit per day?

Answer:

RBI has not set a specific limit for NEFT transfers, allowing banks to decide their own limits.

6. How long does it take for NEFT transactions to be settled?

Answer:

NEFT transactions are settled within two working days.

7. What happens if the IFSC code is wrong for NEFT?

Answer:

Providing the wrong IFSC code can result in the loss of funds.

8. What are the details required to make a NEFT transaction?

Answer:

Details required include the beneficiary’s name, account number, bank name, branch, and IFSC code.

9. What if NEFT is done after 7 pm?

Answer:

NEFT transactions can be done after 7 pm, but settlement happens in batches every 30 minutes.

10. Is NEFT available 24*7?

Answer:

Yes, NEFT is available 24*7, 365 days a year.

11. Can I transfer money to a bank account outside India with NEFT?

Answer:

No, NEFT is limited to fund transfers within India.

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

Answer:

If the account number is wrong, the money may be disbursed to the provided account, and rectification could be challenging.

13. Whom should I approach for complaints related to NEFT transactions?

Answer:

Customers can reach out to their respective banks for transaction-related queries, and if not resolved within 30 days, they can raise a complaint under ‘The Reserve Bank-Integrated Ombudsman Scheme.