NEFT stands for the National Electronic Funds Transfer, an nationwide payment system in India that facilitates the electronic transfer of funds from one bank to another within the country. In order to participate in the NEFT system, banks and their branches must be members of the NEFT network. A list of participating banks can be found on the Reserve Bank of India website.
Payment options have gotten much more sophisticated over the years. Today in India, a standardized banking system is making sense of money transfers and bringing regularity and reliability to a booming emerging market. Here’s how it works.
What’s the difference between NEFT and RTGS?
Money sent via the NEFT system is usually transferred the same day, commonly within a few hours, barring unexpected or extraordinary delays. Using a DNS (Delayed Net Settlement) system, funds are settled and cleared in batches rather than immediately. These batches are processed every hour on the hour from 8AM to 7PM on weekdays, and from 8AM to 1PM on Saturdays.
An RTGS (Real Time Gross Settlement) transfer gets transferred when the order comes in (as opposed to at regular times) and may result in an expedited payment, though an RTGS payment may carry additional fees.
There is a single-transaction limit of ₹50,000 per NEFT transfer, though there is no overall limit to how much money may be transferred across the entire system.
How Does a NEFT Transfer Work?
First, any entity, whether individual, corporate or other, wishing to transfer funds across the NEFT system must fill out an “application” - essentially, a transfer request. They must provide the recipient’s name, name of their bank, the bank’s IFSC (Indian Financial System Code) number, their account information, and the amount to be transferred.
The sender’s bank (also known as the “originator’s bank”) sends the information in a message to the NEFT Service Center, the national pooling center. The pooling center then forwards the message to the NEFT Clearing Center, operated by the Reserve Bank of India in Mumbai, to be included in the next available batch.
The Clearing Center then sorts of the transactions by bank and creates the necessary accounting entries to receive the funds from the originating bank, and to send the funds to the receiving bank.
Finally, the destination banks receive the messages from the Clearing Center and credits the recipients’ accounts.
Are There NEFT Service Fees?
There are usually no fees to receive funds via NEFT.
There is a tiered system of fees to send funds via NEFT. Transactions up to ₹10,000 incur a fee of ₹2.50. Transactions between ₹10,000 and ₹100,000 incur a fee of ₹5.00. Transactions between ₹100,000 and ₹200,000 incur a fee of ₹15.00. Transactions greater than ₹200,000 incur a fee of ₹25.00.
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The NEFT system is a clever, standardized way to reliably send money between Indian bank accounts. For money transfers on the subcontinent, it is an excellent choice.