National Electronic Funds Transfer (NEFT) is an electronic funds transfer process used within India which is used by the banks to transfer money from one bank to the other bank. With this any account holder be it individuals or corporates can transfer funds from any bank to any other bank, provided both the banks are NEFT enabled. The transaction done through NEFT is based on one-to-one funds transfer process or simply batch process facilitated by the Reserve Bank of India.
How it works?
The Reserve Bank of India is the governing body for all the NEFT-enabled bank branches. The NEFT transactions which are being processed go through the Clearing centre (RBI) in which the transactions are being accounted.
NEFT uses the Indian Financial System Code (IFSC) which is an 11-digit alphanumeric code to transfer funds to the respective beneficiary. The IFSC code contains the bank name and the branch name.
NEFT usually works with the hourly batches on weekdays to facilitate transfer between banks. NEFT transaction needs to be initiated before a proper time every day for same day transfer. During weekends only some bathes are used to transfer money. There is no settlement in transactions during public holidays and weekend holidays.
Difference between NEFT and RTGS:
The Real Time Gross Settlement (RTGS) is completely different from the NEFT process which works on an individual transaction basis and not on the hourly batch basis. The transaction settlement could be done any time and the service charges differ from that of NEFT. That’s the reason RTGS has a minimum amount associated with it and it is used only for urgent money transfer.
Benefits of NEFT:
The NEFT was started in Nov-2005 and has undergone several changes with respect to the financial services. Though technical, NEFT is a safe and secure process in which the settlement is quick and effective. Almost all the Indian banks are NEFT enabled.