NEFT Full Form

What is the Full Form of NEFT

NEFT is an abbreviation for National Electronic Fund Transfer. It is among India's most significant electronic fund transfer services. It is a service offered by banks to their customers that enables them to quickly and securely move money across accounts. It is a nationwide payment system that facilitates safe and secure transactions all over the country. Any person, business, or organisation with a current or savings account is eligible to transfer money through NEFT, but once the transaction has started, you cannot halt it or cancel it.

This Story also Contains

1. What is the Full Form of NEFT
2. What Is NEFT?
3. How Does The NEFT System Operate?
4. Steps To Follow To Transfer Money Through NEFT
5. Service Charges For NEFT Transactions
6. Advantages Of NEFT
7. Disadvantages Of NEFT

What Is NEFT?

NEFT (National Electronic Funds Transfer) is an Indian system of electronic transfer of money from one bank to another which was introduced by the Reserve Bank of India. It is an electronic fund transfer technique that is based on Deferred Net Settlement (DNS) which settles transactions in bunches.

It launched in November 2005, the setup was established and maintained by the Institute for Development and Research in Banking Technology.

NEFT allowed bank customers in India to transfer funds between any two NEFT - enabled bank accounts on a one-to-one basis, via electronic messages.

A bank branch must be NEFT- enabled to take part in NEFT fund transfers. It generally takes one day to transfer the funds from one account to the beneficiary account. Settlements and clearance of the funds take place in batches according to the guidelines of the RBI (Reserve Bank of India).

How Does The NEFT System Operate?

Step 1: An individual/firm / corporate willing to transfer money through NEFT can use the internet/mobile banking facility offered by his/her bank for initiating online funds transfer requests. The remitter has to give details of the beneficiary such as the name of the beneficiary, name of the bank branch where the beneficiary has an account, account type, and account number, and IFSC (Indian Financial System Code) of the beneficiary bank branch, etc. for the addition of the beneficiary to his/her internet/mobile banking module. Upon successful beneficiary addition, the remitter can begin online NEFT funds transfer by authorising debit to his/her account. Or, the remitter can also visit his/her bank branch for initiating NEFT funds transfer through branch / offline mode. The customer has to fill in the beneficiary details in NEFT application form available at the bank branch and authorises the branch to debit to his / her account to the extent of the amount requested in the NEFT application form.

Step 2: The message is prepared by the sending bank and sent to the NEFT Service Center, which is also known as the pooling centre.

Step 3: The pooling centre sends the message to the NEFT Clearing Centre, operated by the RBI, to be included in the next available batch.

Step 4: The Clearing Centre sorts the funds transfer transactions beneficiary bank-wise and prepares account entries to get funds from the originating banks (debit) and give the funds to the beneficiary banks (credit). Afterward, bank-wise remittance messages are forwarded to the beneficiary banks through their pooling centre (NEFT Service Centre).

Step 5: The beneficiary banks get the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary customers’ accounts.

Steps To Follow To Transfer Money Through NEFT

1. First, use your user ID and password to sign in to your online banking account.

2. After that, Go to the NEFT Fund Transfer page.

3. Then enter the recipient's name, bank account number, and IFSC code.

4. Now initiate an NEFT transfer once the beneficiary is successfully connected. Enter the amount to be transferred and press the send button.

Service Charges For NEFT Transactions

The structure of charges for NEFT transactions is as follows:

• Beneficiaries will not be charged for inward transactions at destination bank branches (for credit to beneficiary accounts) which means it is free.

• For outward transactions at originating bank branches (charges for the remitter):

• With effect from January 01, 2020, banks have been notified to not impose any charges from their savings bank account holders for NEFT funds transfers initiated online.

• For other transactions (i.e., offline transactions) made through current or other accounts, the originating bank may charge a maximum fee. They are like-

- For transactions of money up to ₹ 10,000: not exceeding ₹ 2.50 {+ Applicable GST (Goods and Service Tax)}

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

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

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

For accounts other than savings bank accounts, the scenario changes depending on the bank, whether they charge this fee or not, and whether the transaction is made online or offline.

Advantages Of NEFT

• Available on all days of the year.

• Near-real-time funds are transferred to the beneficiary account and settled securely.

• Pan-India coverage through a large network of branches of all kinds of banks.

• The beneficiary does not need to go to a bank branch in order to deposit the paper instruments. Remitters can begin the payment via internet banking from their home or place of employment if their bank supports it.

• Positive confirmation to the remitter by SMS (Short Message Service)/e-mail on credit to the beneficiary account.

• Penal interest provision for the holdup in credit or return of transactions.

• No taxes or charges by RBI from banks.

• No extra charges to savings bank account customers for online NEFT transactions.

• The transaction charges have been capped by RBI (Reserve Bank of India)

• The NEFT system can be used for a number of operations in addition to money transfers, such as paying credit card debt to card issuers, sending money abroad, and paying loan EMIs (Equated Monthly Instalment), etc.

Disadvantages Of NEFT

• Despite the bank taking sufficient steps to ensure the security of NEFT transactions, using an unsecured one makes your data prone to be hacked or passed onto a hacker.

• NEFT is a highly technical alternative to transferring funds which might not be easy for everyone to use. A person having little computer knowledge might find it tough to operate and access this method.