There was a time when people used to be astonished to hear that in western countries people did not visit the bank branches and perform all of their banking activity via internet. Much that we realised that India will catch up pace with banking technologies in the new millennium introducing several mechanisms to put banking power on to the finger tips of the customers. The list of such functionality is huge, to name a few – payments via internet, mobile phones, debit cards, home service, etc. Sadly enough, while these options exist, people are not using them for two broad reason. First – ignorance and second – security fear in case their hard earned money gets vanished while transferring funds via ways other than the traditional cheque based banking.
We would be writing a series of such articles to appraise our readers on banking technologies which can vastly enhance both the user experience and efficiency. This article will focus on National Electronic Fund Transfer or NEFT payment transfers.
What is NEFT ?
Putting it simply – NEFT allows for electronic transfer of payments from one bank to another. For example, if you have a bank account with HDFC bank and want to transfer Rs. 1 lac to another bank account say in ICICI bank, prior to NEFT your choices were limited to either cash deposit or transfer via cheque. However with NEFT – you can now make inter bank money transfer electronically. The steps are :
1. Login to your online banking. It is also possible to do this offline by visiting your branch.
2. Select the beneficiary who would be the recipient of the funds.
3. Enter the amount you want to send.
4. Press the send button.
5. In a couple of hours to a maximum one working day the recipient will receive the fund in their bank account.
Before you could select a beneficiary who would receive the funds, you would need to setup a new beneficiary in your online banking system. Banks enforce stringent security controls in setting up of a new beneficiary to prevent fraudulent payments. The key details which you would need for setting up of a beneficiary are :
1. Beneficiary name
2. Beneficiary bank name
3. Beneficiary bank branch name
4. IFSC code of the branch where the beneficiary holds his account.
IFSC code is a 11 digit unique identification code assigned to every single bank branch in India. To know your bank’s IFSC code, you can either find it printed on your cheque book or you can find it by visiting the link – click here
How does NEFT process work
On a high level, NEFT transfer process involves sending of secure message from a customer to his bank to transfer funds to a beneficiary. The bank in turn sends this message to the recipient bank confirming the transfer of funds via a central National clearing cell operated by RBI. The steps are :
1. Transfer instruction received from customer
2. The Branch sends a payment message to its central NEFT center.
3. The NEFT center sends the message it to NEFT clearing center operated by RBI’s National Clearing Cell
4. RBI’s Clearing center sorts the messages and passes on the payment message to the recipient bank.
5. The recipient banks passes on the message to the branch for credit into the beneficiary’s bank account.
We have presented it in the form of a graphical process flow below :
NEFT can be used by any customer who has an account with a branch who participates in NEFT. It is important for both sender and recipient branch to be participating in NEFT. Essentially most of the banks in India are in the list. You can check if your bank is in this list by checking your bank details at – Participating banks.
The transfer can be done via following routes :
1. Online via netbanking. Please contact your bank to enable online banking access. In some cases banks will need a separate registration for activating payment transfer functionality in online banking.
2. Cash deposit (restricted to 50K) in the bank.
3. Filling up of NEFT form in the branch
Limits on transfer via NEFT
RBI has put no restriction on the minimum or maximum amount of money which can be transferred via NEFT. However, individual banks may put in maximum limits which can be transferred via NEFT in interest of customer security and limit the damage on account of erroneous transfer. This limit could be any where from Rs. 1 lac to 10 lacs per day.
Charges for NEFT
NEFT charges on outgoing payments have been capped by the over arching limits put in place by RBI. These limits are :
- Upto 10K – not exceeding Rs. 2.5
- 10K- 1 lac – not exceeding Rs. 5
- 1 – 2 lac – not exceeding Rs 15
- above 2 – not exceeding Rs. 25
- Inward NEFT payments – free
Having said that, individual banks may levy different charges within the overall cap. For example, banks do not charge their privileged customers for NEFT. Hence consult your bank’s statement of charges related to NEFT transactions.
Timelines of credit
Generally NEFT payments are credited within 3-4 hours time. A few technical details around NEFT payment cycles are :
1. NEFT payment messages are processed on an hourly cycle by RBI’s clearing cell.
2. The operational hours for the clearing is 8 am to 7 pm on Monday to Friday (12 hourly cycles)
3. On Saturday it operates on 8 am to 1 pm (6 hourly cycles)
3. The first 10 batches during Monday to Friday and first 5 batches on Saturday are processed on same day. The remaining are processed on next working day. For example, any payment instruction after 12 pm on Saturday will be processed on Monday morning.
NEFT transfers are pretty much hassle free. However, it is good to know what to do in case things don’t go as planned. If a NEFT payment has not reached to the beneficiary by end of next business day, the customer can contact the NEFT Contact Facilitation Centre (CFC) of their respective bank. The contact details can be found at (http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2070)
If CFC is unable to resolve the issue, the customer can approach National Clearing Cell of RBI Mumbai at firstname.lastname@example.org or write to General Manager, Reserve Bank of India, National Clearing Centre, First Floor, Free Press House, Nariman Point, Mumbai – 400 021.
How about NRIs ?
NEFT services are available for NRIs. However NRIs should be careful regarding transfer of funds from NRO account to NRE accounts as it is likely to be rejected. NRE accounts do not accept funds from NRO accounts. Other than that, NRIs can freely use the NEFT service to make payment from their NRE / NRO accoun to any other account in India. In addition, NEFT service can not be used to make overseas payments.
Wrap up – NEFT Benefits
We won’t be wrong to say that NEFT based payments have been a clear driver to add efficiency in the Indian payment system. Payments by cheque are not only prone to error but also are costly and time consuming. You can make payments from the convenience of your office / home without having to worry about the loss of cheque in post or fraudulent usage. Plus, when you need to make urgent payments, cheques can not be the option as they take upto 3 working days to clear.