What is NEFT?
National Electronic Funds Transfer (NEFT) is an electronic payment system launched by the Reserve Bank of India in November 2005. It allows one-to-one funds transfer between bank accounts across India, using secure messaging and settlement through a central processing system. Unlike instant systems, NEFT settles transactions in half-hourly batches.
How Does NEFT Work?
- Initiation: You log in to your bank’s internet or mobile banking portal or visit a branch and provide beneficiary details (name, account number, bank branch, IFSC code, amount).
- Message Sending: Your bank formats this into an electronic message and sends it to its NEFT Service Centre (pooling centre).
- Batch Processing: The pooling centre forwards all collected messages to the RBI-operated NEFT Processing Centre at scheduled half-hourly intervals.
- Settlement: At the processing centre, transactions are sorted by destination bank, funds are debited from originating banks, and credit instructions are sent to destination banks.
- Credit to Beneficiary: Destination banks receive the instructions and credit the funds to the beneficiary’s account, sending confirmation via SMS or email if enabled.
Types of NEFT
- Offline (Branch-based): Fill out an NEFT form at a bank branch and submit it to initiate transfer.
- Online (Internet Banking): Use your bank’s online portal to add beneficiaries and transfer funds electronically.
- Mobile Banking: Initiate NEFT via your bank’s smartphone app after adding beneficiary details.
Feature of NEFT
- Nationwide Reach: Available across all NEFT-enabled bank branches and electronic channels.
- Batch Settlement: Operates in 48 half-hourly batches daily, including holidays.
- 24×7 Availability: Can be initiated any day, any time.
- No RBI Fees: The RBI does not levy processing charges.
- Notifications: Optional SMS or email alerts on successful credit.
- Refund Guarantees: Banks must pay penal interest if delays exceed specified limits.
Benefits of NEFT
- Convenience: Transfer funds without visiting a branch.
- Cost-Effective: Low bank charges; many banks offer free online NEFT for savings accounts.
- Security: Encrypted messaging and centralised settlement minimise fraud risk.
- Flexibility: No minimum or maximum amount mandated by RBI; banks may set their own thresholds.
- Accessibility: Useful for both high-value and low-value transfers across India.
Uses of NEFT
- Paying credit card bills and loan EMIs.
- Sending salaries or vendor payments in businesses.
- Transferring funds to family or friends in other cities.
- Inward remittance from abroad via partner banks.
- Disbursing insurance claims or scholarship amounts.
Examples of NEFT
- A software engineer in Bangalore sends her rent money to her landlord’s Mumbai account via internet banking NEFT.
- A small shop in Jaipur pays ₹50,000 to a Delhi wholesaler by visiting its branch and submitting an NEFT form.
- Parents in Kolkata receive a ₹1 lakh inheritance transfer from their son working in Chennai, using mobile banking.
NEFT Requirements
To complete an NEFT transfer, you need:
- Beneficiary’s name as per bank records.
- Beneficiary’s account number.
- Beneficiary bank name and branch.
- IFSC code of the beneficiary branch.
- Your own account details and authorization (e.g., ATM PIN or OTP).
How to Do NEFT Online?
- Log in to your bank’s internet or mobile banking.
- Add the beneficiary by entering their name, account number, branch, and IFSC code.
- Once approved, select “NEFT Transfer,” choose the beneficiary, enter the amount and remarks.
- Confirm with OTP or transaction PIN.
- Note the transaction reference number for future tracking.
How to Do NEFT Offline?
- Visit your bank branch and request an NEFT form.
- Fill in beneficiary details, transfer amount, and your account number.
- Submit the form at the teller counter.
- Authorize debit via signature or debit card/PIN as required.
- Collect the acknowledgment receipt with transaction reference.
NEFT Timings
NEFT operates 24×7, 365 days a year. Transactions are processed in 48 half-hourly batches from midnight to midnight, so you can initiate transfers at any time, including bank holidays.
NEFT Limit
The RBI sets no minimum or maximum transfer limit for NEFT. However:
- Non-Account Holders: Can remit up to ₹50,000 per transaction in cash at a bank branch.
- Indo-Nepal Transfers: Under the remittance facility, account holders may send up to ₹2,00,000 per transaction to Nepal.
- Bank-Set Limits: Individual banks may impose their own transaction caps with board approval.
NEFT Charges
While the RBI does not charge fees, banks may levy service charges on outward transactions:
- Up to ₹10,000: Up to ₹2.50 + GST
- ₹10,001–₹1 lakh: Up to ₹5 + GST
- ₹1 lakh–₹2 lakhs: Up to ₹15 + GST
- Above ₹2 lakhs: Up to ₹25 + GST
Most banks have waived NEFT charges for online transfers from savings accounts since January 2020.
How much time does it take for NEFT Transactions to Settle?
NEFT settles in half-hourly batches. Once your transaction enters a batch, banks typically credit the beneficiary account within two hours of that batch being processed. From initiation to credit, this may take up to 2½ hours under normal conditions.
Factors Affecting NEFT Settlement Time
- Batch Cut-off: Whether your transaction missed the current batch and waits for the next.
- Bank Processing: Internal delays in validating or forwarding messages.
- Detail Accuracy: Incorrect beneficiary information can lead to returns and retry.
- System Maintenance: Scheduled RBI or bank downtime can pause processing.
Challenges of NEFT
- Non-Instant: Batch processing means it is not real-time compared to IMPS or UPI.
- Dependency on Details: Errors in account number or IFSC can delay or fail transfers.
- Offline Hassle: Customers without online access must visit branches.
- Technical Interruptions: Occasional network or system issues can hold up batches.
Components of NEFT
- Originating Bank: Debits the sender’s account and creates the transaction message.
- NEFT Service Centre (Pooling Centre): Gathers and forwards messages in batches.
- NEFT Processing Centre: Operated by RBI to sort, net and settle transactions between banks.
- Destination Bank: Receives instructions and credits the beneficiary’s account.
- IFSC Code: Unique 11-character code that identifies each bank branch for routing transfers.