What Is NEFT?

National Electronic Funds Transfer or NEFT as it is commonly known, is a financial service which provides domestic fund transfer. Introduced in 2005, this service rapidly gained traction due to the efficiency it brought customers through quick and safe, one-to-one fund transactions.

NEFT usage

For businesses:

Businesses often have multiple transactions throughout the day, which can range from small to large sums. NEFTs offer businesses a good alternative to other major services like IMPS, since they do not have any limits on the number of transactions made in a day. NEFTs also offer a safe portal for business to process and transfer employee salaries, vendor fees and more.

For individuals:

NEFTs are popular among individuals who have to transfer a large amount to other individuals or businesses. This can include rent payments, credit card repayments, insurance payouts and more.

How do NEFTs work?

Processing in batches:

Unlike real-time systems like RTGS (Real Time Gross Settlement), NEFT processes transactions in hourly batches. This means that transactions are not settled instantly but are grouped and processed at specific times during the day. This batch processing allows the system to handle a large volume of transactions efficiently.

Timings:

NEFT services are available 24x7, 365 days a year, including on bank holidays. This ensures that users can initiate transactions at any time that suits them, although the actual settlement of transactions happens at designated batch times.

No minimum or maximum limit:

NEFT does not have a minimum or maximum limit on the amount of money that can be transferred in a single transaction. Nor does it have a limit on how many NEFT transactions can be done in a day.

Usage area:

NEFTs are a domestic service, to be used only within India’s borders. The only exception to this is Nepal.

Why use NEFTs?

NEFTs offers users a number of conveniences which include:

Convenience:

NEFTs provide a convenient way to transfer funds without needing physical checks or cash. Users can complete transactions from their homes or offices using internet or mobile banking.

Accessibility:

The NEFT service is accessible to all customers who have access to internet banking or mobile banking facilities, allowing them to transfer funds quickly and easily.

Cost-Effective:

NEFT is generally a cost-effective method for transferring money, with banks charging nominal fees compared to other methods like wire transfers.

Wide reach:

Almost all banks in India are part of the NEFT network, which means users can transfer funds to nearly any bank account in the country, enhancing its usability and reach.

How to use NEFTs:

While using an NEFT to transfer funds, these are the steps that occur:

Initiation:

You can initiate the fund transfer by providing essential details such as the beneficiary’s name, account number, bank name, branch, and the Indian Financial System Code (IFSC) of the beneficiary’s bank branch. This information is important to ensure that the funds are credited to the correct account.

Authorisation:

After entering the details, the bank will authorise the transaction by verifying the account holder's credentials and debiting the specified amount from the sender’s account. This step can also involve using secure authentication methods like OTP (One-Time Password) for added security.

Batch processing:

As NEFTs are processed at regular intervals, your transaction will be queued for processing in the next available batch.

Settlement:

During the batch processing, funds are transferred electronically to the beneficiary’s bank, where they are credited to the beneficiary's account. The beneficiary is usually notified of the credit through a bank statement or SMS alert.