NEFT Full Form

In banking terminology, NEFT is the acronym for National Electronic Funds Transfer. This is an Indian system to transfer money from one bank to another bank, electronically. This system was introduced by the RBI, Reserve Bank of India. This system of banking is actually an electronic fund transfer system that is based on the Deferred Net Settlement (DNS), further, this system of DNS settles the transaction in batches.

Your bank branch should be NEFT-enabled if you want to take part in the NEFT fund transfer system. NEFT takes generally one day to transfer the fund from one account to the other beneficiary account. The settlement system and the clearance of the funds also take place in multiple batches according to the guidelines which are devised by the RBI.

NEFT Full Form

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National Electronic Funds Transfer is the NEFT long form or NEFT abbreviation. It helps in the transfer of funds via electronic transfer and this system is maintained by RBI, Reserve Bank of India. This system started in November 2005. The setup was established and further this was maintained by the Institute for Development and Research in Banking Technology. NEFT enables the bank customers located in India to transfer their funds between any two bank accounts on a one-to-one basis, this is to be noted that the bank accounts must be NEFT-enabled. The process is done through electronic messages.

This system is different from the real-time gross settlement system, as the fund transfers through the NEFT system do not occur on a real-time basis. Previously, the NEFT system settled their fund transfers in hourly batches with 23 settlements that occurred between 00:30 hrs. to 00:00 hrs.

From 16 December 2019, there were 48 half-hourly batches which occurred between 00.30 am to 00:00 am every day regardless of the fact that whether it was a holiday or otherwise. 

According to genuine data dated 30 November 2019, the NEFT facilities were available at 1,48,477 branches or offices of 216 banks that are located across the country, this also provided online access through the website of NEFT-enabled banks. NEFT became popular due to the ease and the system of efficiency with which the transactions system can be concluded. 

While there is no limit, either minimum or maximum the amount of funds can be transferred using NEFT.

Process of the System

In this section we will discuss the detailed process of NEFT meaning, which are as follows: 

1. The customer here fills an application form. The customer is required to fill in details of the beneficiary (like the name of the beneficiary, bank, branch name, IFSC, his account type, and the account number) and the amount to be remitted should also be mentioned. The remitter then authorizes his or her bank branch to debit his account and then to remit the specified amount to the beneficiary’s account. This facility is available via online banking, while some banks offer the NEFT facility simply from ATMs as well.  

2. Thereby, the originating bank branch after which prepares a message and sends the particular message to the pooling centre (known as the NEFT Service Centre).

3. The pooling centre afterwards forwards the particular message to the NEFT Clearing Centre (that is being operated by the National Clearing Cell, Reserve Bank of India, Mumbai) this is to be included for the next available batch.

4. The Clearing Centre sorts the fund’s transfer transactions and then the destination bank-wise and they prepare the accounting entries to receive the funds from the originating banks (debit) and give the funds to the destination banks (credit). Thereafter, the bank-wise remittance messages are to be forwarded to the destination banks through their pooling centre (NEFT Service Centre).

5. The destination banks also receive the inward remittance of these messages from the Clearing Centre and thereby pass the credit to the beneficiary customers’ accounts.

Settlement Timings

NEFT transfers are generally settled on a half-hourly basis. The batches are done every day between 00:30 am and 00:00 am all-around the year.

NEFT originally used to settle fund transfers in hourly batches. The RBI then reduced the clearance times to half-hourly batches from April 2016. In August 2019, the Reserve Bank of India (RBI) announced that it would enable the round-the-clock settlements from 16 December 2019 onwards. 

How much will you be charged for NEFT transactions?

To know this exactly, we will layer a structure of charges, which are as follows:

• The inward transactions which are transacted at the destination bank branches (are for credit to beneficiary accounts):

This is free, with no charges required to be collected from the beneficiaries.

• The outward transactions that are originating in the bank branches (that charges for the remitter):

Starting from January 01, 2020, the banks have been advised not to levy any charges from the savings bank account holders for the NEFT funds transfers that are being initiated online.

While the charges can be levied for the outward transactions which are the originating bank for other transactions, i.e., via the offline transactions (this means at the bank branch through the NEFT form), the transactions done through this current or other accounts –

- For the transactions up to ₹ 10,000: not exceeding ₹ 2.50 (+ Applicable GST)

- For transactions which are above ₹ 10,000 up to ₹ 1 lakh: not exceeding ₹ 5 (+ Applicable GST)

- For transactions that are above ₹ 1 lakh and up to ₹ 2 lakhs: not exceeding ₹ 15 (+ Applicable GST)

- For transactions that are above ₹ 2 lakhs: not exceeding ₹ 25 (+ Applicable GST)

This typical scenario varies bank-wise whether they levy this charge or not is a matter of the transaction which are done online or offline for the accounts that are other than a savings bank account.

The RBI also announced on 11 June 2019 that all the charges for NEFT and the real-time gross settlement transactions are to be collected from the banks, and this would be waived from 1 July 2019, and it was asked to the banks to pass on the benefits to customers (so that the RBI charges nothing for these transactions, the only charge levied is by the bank through which this outward transaction is to be started). 

NEFT Full Name: National Electronic Funds Transfer

National Electronic Funds Transfer abbreviated NEFT is basically an Indian system that helps in the electronic transfer of money from one bank to another. This was introduced by the Reserve Bank of India. This is a system of an electronic fund transfer system that is based on the Deferred Net Settlement (DNS) which settles the transaction in batches.

A bank branch should be an NEFT-enabled one in order to take part in the NEFT fund transfer. This usually takes one day to transfer the fund from one account to another bank account or the beneficiary’s account. These settlements and the clearance of funds take place in batch lots according to the guidelines of the RBI.

What is required before using NEFT?

The things required before using NEFT are as follows:

• You need to provide the Name and full Bank account number of the beneficiary to whom, you want to transfer money).

• Also, provide the Indian Financial System Code (IFSC) of the beneficiary Bank/Branch.

Difference between RTGS and NEFT

Although RTGS and NEFT both are used for the transfer of funds electronically, while there are some specific differences that are laid between them on the basis of the below-mentioned criteria: