Full Form of NEFT

The full form of NEFT is National Electronic Fund Transfer. It is an online system for transferring funds from one account in one bank to another account in another bank. They started it in 2005. It was made mandatory for all banks on SEFT (Special Economic Fund Transfer system) to migrate to the NEFT system. NEFT system operates on Deferred Net Settlement. Transfer of Fund Transactions processes in batches instead of continuous individual settlement, which happens in RTGS (Real Time Gross Settlement).

NEFT works on Public Key Infrastructure (PKI) to ensure end-to-end security and Indian Financial Network (INFINET) to connect bank branches for electronic fund transfer.

Banking system success highly depends on development in information technology and communication. For example, electronic transfer mode is now a secure, safe, and easy way to transfer money. In electronic transfer, the amount is deducted from an account and credited to another account in a matter of moments, which helps in time-saving, and no effort in the actual physical transfer. There are two systems for electronic fund transfer in India: NEFT and RTGS, mainly maintained by the Reserve Bank of India.

• The process entirely depends on electronic fund transfer against physical fund transfer, which takes time and much more effort.
• Processing charges applicable in NEFT transactions are very less.
• NEFT method is highly dependable for making payments or receiving funds online since banks have to follow RBI norms.
• Time-saving: Unlike other payment methods, NEFT helps in quick settlements in accounts, which helps in efficiency for individuals and many businesses.

A most important requirement for using NEFT is a bank account and an active internet banking facility in your account. An Individual or business intends to transfer funds through NEFT to fill the beneficiary’s details in the application form.

The application form mainly consists of the following details: -

• Account Name: individual/business name as registered in their bank.
• Bank Name: Name of Bank (For inter-bank transfer)
• Bank Branch: City and area in which the Bank branch is located.
• IFSC Code: Indian Financial System Code is an alphanumeric code assigned to every bank of every bank required for online fund transfer.
• Account Type.
• Account Number of Beneficiary.

• Remitter authorizes the bank branch to debit the amount from his account and credit it to the beneficiary’s account.
• The message is sent to the remitter bank's pooling center (NEFT Service Centre).
• The pooling center forwards the message to the NEFT Clearing center (maintained by National Clearing Cell, RBI) to make the transfer available in the next batch.
• The clearing center adjusts fund transfer per every bank, makes necessary accounting entries into its system, and matches it with bank accounting entries, i.e., receive funds from the remitter bank and transfer them to the destination bank.
• The message is sent to banks involved in this transaction from the pooling center.
• A beneficiary bank receives and credits the amount to a beneficiary account.
• An alternate method is available for individuals or businesses who do not have an account with the bank through cash deposits and filling out an application form for NEFT transactions.
• To avoid money laundering cases, banks need to validate the beneficiary.

NEFT transactions are settled in 11 batches from 8 A.M. to 7 P.M. from Monday to Friday and in 6 batches on Saturday 8 A.M. to 1 P.M. (not on the second and fourth Saturday). No transaction settles on Sundays and bank holidays. Transactions made after 7 P.M. settles on the next working day. The individual can make transactions after working hours or on holidays, but they will settle it on the next working day.

NEFT transfer minimum limit available is ₹1. There is no maximum limit assigned to NEFT transactions from RBI. However, every bank can set a limit for NEFT transactions. E.g., ICICI bank has a maximum limit of up to ₹10 lakhs. The cash transaction limit is set at a maximum of upto ₹ 50,000 for each transaction, but there is no limit on the total amount transferred.

GST applicable shown on the table above is calculated on charges. For e.gIf you made the transfer through NEFT of 15,000, then the charges applicable are ₹5 plus 18 % GST on ₹ 5, i.e., ₹ 0.9 (90 paise). Therefore total charges applicable to this transfer are ₹ 5 + ₹ 0.9 = ₹ 5.9.

• Development in information technology and infrastructure are key components of modern banking services. Important factors that create value for any customer are quality of service, trust followed by technology, location, and type of bank.
• Facilities like NEFT, RTGS, and IMPS provide customers with easy, simple, and time-saving ways to transfer amounts from one account to another, including interbank transfer, increasing transparency in the process and helpful for individuals and businesses to settle payments.
• Challenges in front of RBI are making it available 24/7 to all customers, reducing paper-based payments, and monitoring transactions to prevent money laundering.
• The Reserve Bank of India decided to start the Central Payment Fraud Registry. RBI's payment system vision 2021 has the primary object of 'Empowering exceptional (E)Payment experience' to make sure every Indian will have a payment system that is safe, secure, convenient, quick, and affordable.
• RBI continuously collects data on fraud in online payment systems to form a detailed framework. Even with proper education and awareness challenges, electronic fund transfer systems like NEFT will help grow transparency and, business structure in India.

This article has guided the Full Form of NEFT (National Electronic Fund Transfer) and its definition. Here we discuss the prerequisites of using NEFT, the importance, process, and timing of national electronic fund transfer, along with its limits and charges. You may refer to the following articles to learn more about finance: -

• Full Form of POA
• Contra Asset Account Definition
• Offset Account
• Debit
• Sinking Fund Bonds