NEFT - National Electronic Funds Transfer

What does NEFT mean?

‘NEFT’ means National Electronic Funds Transfer. This scheme enables the customers to transfer funds from one bank branch to another across the country. Fund transfers are settled in batches. RBI acts as the service provider and transfers the credit to the other bank’s account. IFSC code is required to perform online money transfer using NEFT.

What is necessary for an NEFT transaction?

Here is a list of necessary pre-requisites for NEFT transaction-

1)The branches of originating and destination banks should be NEFT-enabled to transfer money online.
2)The remitter should have the necessary details like beneficiary name, account number and account type, name and IFSC code of the bank branch.

How does the NEFT system operate?

1)The remitter fills in the NEFT form giving the particulars of the beneficiary (bank-branch, name, account type and account number) and authorizes the branch to remit the specified amount to the receiver.
2)The originating bank branch prepares a message and sends it to Service Centre.
3)The Service Centre forwards the same to the Clearing Centre to be included in the next available batch.
4)The Clearing Centre sorts the transactions bank-wise and prepares accounting entries to receive funds from the originating banks and give the electronic funds to the destination banks. Thereafter, bank-wise remittance messages are transmitted to the destination banks.
5)The destination banks receive the remittance messages from the Clearing Centre and pass on the credit to the beneficiary accounts.

What are the benefits of using National Electronic Funds Transfer?

NEFT process is very secure and there are negligible chances of any error occurring at any stage. The beneficiary does not need the physical cheque or Demand Draft from the remitter. She/he need not visit bank for depositing the documents. Credit confirmation of the remittances is sent by SMS or email. These transactions are irrevocable and final by nature, which means funds transferred cannot be remitted back. These transfers will eliminate the delays in fund movements to a large extent, as the transactions have to be settled within a span of 24 hours from the initiation of the process. As the whole process is paperless, it is an eco-friendly form of transferring funds. This is a simple, secure, safe, cost effective and fastest way to transfer money online.