How NEFT works and what are its advantages and its key features….we are going to discuss everything about “NEFT stands for” in this post.
- NEFT stands for National Electronic Fund Transfer. It is a mode of payment system owned and fully operated by the Reserve Bank of India i.e. RBI. It was started in November 2005 and established by Institute for Development and Research in Banking Technology.
What are the advantages of using NEFT?
• 24*7*365 service available
• It covers the branches of all types of banks
• Provide positive confirmation to sender/remitter/payer by e-mail or SMS on crediting amount to beneficiary’s account.
• No fee levied by RBI on banks for transferring amount. This section will be discussed in detail further.
• Besides fund transfer, NEFT can be used to pay credit card dues, EMI of loans, inward foreign exchange remittances etc.
How this NEFT system works?
In very simple language Operation of NEFT can be understood under following points.
Step 1: An individual, firm, or corporation wishing to transfer funds using NEFT can use his or her bank’s internet/mobile banking service to initiate an electronic funds transfer request. Sender must have the details of Beneficiary’s
Upon successfully filling the details of beneficiary in form, payer can initiate the fund transfer through NEFT by authorising the debit from his/her account.
Step 2: A message or SMS is prepared by sender’s bank and delivered to NEFT pooling centre.
Step 3: Pooling centre forward the message to NEFT clearing centre which is operated by RBI, for further processing.
Step 4: The Clearing Centre sorts beneficiary bank-by-beneficiary bank funds transfer transactions and creates accounting entries to collect payments from the originating banks (debit) and transfer funds to the beneficiary banks (credit). A message is forwarded to beneficiary’s banks about receiving funds.
Step 5: Beneficiary’s bank receive the SMS from pooling center and fund is credited to the gainer’s account.
Also Check:– Difference between IMPS and NEFT in 2022!
Charges imposed by Banks for NEFT transactions:–
As mentioned above, RBI does not levy any charges on banks for NEFT transfer.
No charges on those who have saving bank account. Also no fee is charged for inward transactions ( IT means transaction done by sender/remitter’s bank from where money is deducted).
However, different charges are imposed for outward transactions (OT means beneficiary’s account in which money will be deposited) through NEFT. The charges are as follows:
When transactions upto 10,000 = Rs.2.5 +Applicable GST
When transactions upto 10,000 to 1 lakh = Rs. 5 + Applicable GST
When transactions upto 1 lakh to 2 lakh = Rs. 15 + Applicable GST
When transactions above 2 lakh = Rs. 25 + Applicable GST
Some essential features of NEFT:
1. It is one way of transaction means only payer or sender can transfer funds to beneficiary’s account.
2. NEFT does not facilitate fund transfer to other countries except Nepal.
3. In case of any dispute, you may approach grievances redressal cell of your bank. If your problem is not sorted within 30 days, you can register complaint on the RBI website under “Integrated Ombudsman Scheme”
As this brief article on NEFT has shown, it is a fast, reliable, convenient and inexpensive way of sending money from one bank account to another.
It can be used by companies or high net-worth individuals to send or receive high values of money and can even be used for regular banking transactions.
That’s it for today! Hope you’ve found the article useful. Please let me know if you have any questions. The next part of the series will be up soon. Stay tuned!