What is NEFT - Full Form in Banking, Timings, Limits, Charges & How it Works

NEFT (National Electronic Funds Transfer) is an RBI-regulated digital payment system that allows secure, bank-to-bank transfers across India. NEFT in banking works on a deferred settlement model where transactions are processed in half-hourly batches, making it suitable for non-urgent transfers. It is widely used for its 24x7 availability, cost-effectiveness, and ease of access through net banking, mobile apps, and bank branches.

In the following sections, we will learn more about NEFT, including how it works, its benefits, requirements, and more. 

NEFT Full Form in Banking

NEFT full form is National Electronic Funds Transfer. It is an RBI-regulated digital payment system that enables secure and one-to-one fund transfers between bank accounts across India.

What is NEFT?

NEFT in banking is a nationwide payment mechanism that processes transactions in half-hourly batches, 24*7x365, through a centralised system managed by the Reserve Bank of India (RBI). Unlike real-time systems like RTGS, NEFT works on a deferred settlement basis, making it ideal for low- and mid-value transfers that aren’t time-sensitive.

NEFT supports both online and offline fund transfers and is available through internet banking, mobile apps, and physical bank branches. It is widely used for purposes such as bill payments, salary disbursals, loan EMIs, rent payments, and more.

Features of NEFT

Here are the key features that make NEFT a preferred fund transfer system in India:

• Availability: 24x7x365 via online banking; limited hours at bank branches.
• Batch Settlement: Funds processed in 48 half-hourly intervals daily.
• Minimum Limit: ₹1
• Maximum Limit: No upper cap (banks may impose limits).
• Wide Coverage: Available across all major Indian banks and select foreign branches.
• Modes: Can be initiated online (net banking/mobile) or offline (bank branch).
• Secure & Regulated: Operated by RBI with end-to-end encryption.
• Low Charges: NEFT is cost-effective, especially for personal and SME transfers.
• Cross-Border Facility: Can be used for Indo-Nepal Remittance under Indo-Nepal Remittance Facility (INRF).

How Does NEFT Work?

NEFT (National Electronic Funds Transfer) processes transactions in 48 half-hourly batches each day, ensuring secure and efficient fund transfers between bank accounts. Managed by the Reserve Bank of India (RBI), it uses a centralised electronic message-based system to route payments bank-to-bank.

Below is the complete process:

Step 1: The sender initiates the NEFT transaction through internet banking, mobile banking, or by visiting the bank branch. They must then provide the beneficiary’s account number, bank name, branch, IFSC code, and the transfer amount.

Step 2: The sender’s bank verifies the transaction details and checks for sufficient balance. Once validated, the bank generates a secure electronic payment instruction and sends it to its NEFT service centre. 

Step 3: The NEFT service centre collects all outgoing transactions and forwards them in batches to the NEFT Clearing Centre managed by the RBI.

Step 4: RBI processes transactions in half-hourly settlement cycles. Once the transaction is picked up, the RBI debits the sender’s bank and credits the beneficiary’s bank.

Step 5: The beneficiary’s bank receives the funds and credits the amount to the beneficiary’s account.

Step 6: Both the sender and the recipient receive confirmation from their respective banks via SMS or email.

Note: NEFT transfers are typically completed within 30 minutes to 2 hours depending on batch timing and bank responsiveness.

Example of NEFT

Let’s use an example to demonstrate how NEFT transactions work. 

At 2:10 p.m. on a given day, Mr. Sharma uses his HDFC Bank mobile app to send ₹3,500 to pay his electricity bill. The payment is made through NEFT to the Bengaluru Electricity Board, which has an account at State Bank of India. He enters the required details — account number, IFSC code, and amount — and submits the request.

Parallelly, at 2:25 p.m. on the same day, Ms. Gupta logs into her ICICI Bank net banking to send ₹8,000 to her sister, Mrs. Rao, who also has an account at State Bank of India. She fills in the bank details and confirms the transfer as well.

Comparing the two scenarios, even though Mr. Sharma and Ms. Gupta used different banks and apps for varying transactions, both transfers were made around the same time, thus implying that they will eventually be grouped together for processing under the same NEFT cycle with the Reserve Bank of India.

Ways of NEFT Transfer

The following modes of transfers can be used with NEFT (National Electronics Fund Transfer):

Via Internet Banking

• Internet banking is the facility to avail of banking services through the bank’s official website. 
• To transfer funds via net banking, you have to first register for net banking online or via a bank branch. 
• Then, you must add a beneficiary by entering their bank account details before transferring funds.

Via Mobile Banking

• Mobile banking allows a bank’s customers to access its services on internet-enabled smartphones via the bank’s mobile application. 
• To make payments, first download your bank’s official app from the Play Store or App Store and sign up using your banking details. 
• Then, select ‘Pay’ or ‘Fund Transfer’ and add a new beneficiary/payee, entering the payee and payment details. 

Via Bank Branch

• You can initiate fund transfers via NEFT by directly going to your nearest bank branch. 
• Ask for an NEFT transfer form and fill in the necessary details. 
• Then, submit this form and your payment (cash or cheque) to initiate a transfer. This mode is ideal for anyone unfamiliar with mobile or internet banking.

NEFT Requirements

To transfer funds via NEFT, you need to have the following information:

• Full name of the beneficiary you want to transfer funds
• Beneficiary’s bank name
• Branch name where the beneficiary holds an account
• Account number 
• IFSC code for the bank branch
• Amount to be transferred 
• Remarks or notes for record keeping (optional)
• Sender’s and beneficiary’s Legal Entity Identifier (for NEFT and RTGS transactions of ₹50 crore and above)

How to Do NEFT Online?

NEFT fund transfers can be done online via internet banking or mobile banking. Here are the steps to follow to transfer funds via NEFT:

Step 1: Visit your bank’s official website and log in to the net banking portal. You can also use the bank’s mobile app by downloading it and signing in with your credentials.

Step 2: Go to the fund transfer section. It might be labelled as ‘Transfers’, ‘Payments’, ‘Fund Transfer’, or simply ‘Pay’.

Step 3: Select ‘NEFT’ from the available fund transfer options like RTGS or IMPS. Choose whether you want to transfer the funds ‘Now’ or schedule it for ‘Later’.

Step 4: If you haven’t added the beneficiary yet, click on ‘Add Beneficiary’ and enter their name, account number, bank name, IFSC code, and other required details.

Step 5: Once the beneficiary is added and approved, recheck all details and enter the amount you wish to transfer.

Step 6: Enter the OTP (One-Time Password) received on your registered mobile number and click on ‘Confirm’ to complete the NEFT transaction.

Upon transfer of the amount to your bank account, you will receive a confirmation via SMS or email.  

How to Do NEFT Offline?

You must visit a nearby bank branch for the offline process and fill out the NEFT form. Next, submit it along with payment. Here are the detailed steps guiding you to transfer funds:

Step 1: Visit your nearest bank branch and ask the customer representative for an NEFT form.
Alternatively, download the form from your bank’s official website, print it, and bring it with you.

Step 2: At the top of the form, fill in the branch name, current date, and your full name.

Step 3: Enter the remitter details, including your account number and the amount you wish to transfer (both in words and numbers).

Step 4: Provide the beneficiary’s details such as:

• Full name
• Bank account number
• Bank name and branch
• IFSC code

Step 5: Based on your payment method, do one of the following:

• If paying by cheque, Write the cheque number.
• If paying by cash, Mention the note denominations.

Step 6: Sign the form and print your name below your signature.

Step 7: Submit the filled form along with your cheque leaf or cash at the bank counter.

Step 8: Once the transaction is processed, you’ll receive a confirmation via SMS or email from your bank.

NEFT Form

An NEFT form is required to initiate a NEFT transaction. The form typically includes essential details such as the sender’s name, account number, and branch details, along with the beneficiary’s name, account number, bank name, and IFSC code to ensure accurate fund transfer. The transaction amount must be specified in both figures and words. 

Additionally, the mode of payment (cash, cheque, or account debit) should be selected, and the sender must provide a valid signature for authorization. Once completed, the form must be submitted at the bank branch for processing, after which the funds are transferred as per the bank’s NEFT processing schedule.

NEFT Timings

The Reserve Bank of India ensures the NEFT system’s round-the-clock availability, i.e., it’s available 24x7x365. In other words, you can carry out NEFT transactions at any time using the online mode. If the problem is at the RBI's end, the central bank will broadcast notifications. 

However, for transactions carried out via the bank branch, each bank has its own NEFT timings within which transactions must be carried out. NEFT also typically remains inactive on Sundays, bank holidays and 2nd and 4th Saturdays. 

NEFT Limit

RBI does not impose any limit on transaction amounts for the NEFT system. However, banks can impose their limits. It’s advisable to check these NEFT limits with each bank and their official websites.

NEFT Charges 

The Reserve Bank of India does not charge anything for providing NEFT services. However, banks can charge a nominal fee to customers and non-customers for NEFT services. Here is a list of applicable fees:

A different set of charges is applicable for remittances to Nepal from India using the NEFT system under the Indo-Nepal Remittance Facility (INRF). These charges range from ₹5 per transaction to ₹500 depending on the remittance amount and the bank. 

Benefits of NEFT

Here are some of the most notable benefits of using NEFT for payments:

Round-the-Clock Availability

• According to the Reserve Bank of India guidelines, NEFT is available anytime throughout the day for the entire week and year, with no exceptions. 

No Lower Limits

• NEFT’s minimum transaction limit is ₹1, allowing anyone to carry out NEFT transactions regardless of their size. 
• The maximum limit is ₹2 lakh for each transaction, making NEFT perfect for most daily fund applications.

Cost-effective Payments

• NEFT is one of the most affordable modes of payment for medium—to large-sized transactions since banks charge only nominal fees. 
• It’s much more cost-effective than other available options. 

Availability across India and Nepal

• You can transfer funds to any bank account in India and even send money to Nepal (subject to certain limits). 
• Due to the wide network of banks, you can send payments anywhere in the country.

Ease of Transactions

• You can transfer funds both online and offline. 
• You can use any bank’s net banking or mobile banking facility to transfer funds with a few clicks or visit the nearest branch and pay in cash or cheque.

Prompt Confirmations

• After a successful transaction, both parties, the sender and receiver, receive confirmation messages via SMS. 
• This ensures transparency in transactions by maintaining records. 

High Degree of Safety

• Since the RBI manages and operates the NEFT system, it minimises the chances of loss or theft compared to other fund transfer modes. 
• Several safety protocols are in place to keep funds safe during transfers.

Faster Than Traditional Options

• NEFT transfers are generally faster than cheques or electronic wire transfers.

Challenges of NEFT 

Here are some of the disadvantages of NEFT you may want to learn about:

Transaction Limits

• The maximum limit for each NEFT transfer is ₹2 lakh. Furthermore, different banks have set their daily NEFT transaction limits, which makes bulk transfers unsuitable. 

Delay in Payment Processing

• Transactions made via NEFT are not settled instantly. 
• The transactions are processed in half-hour batches, so you can use an alternative payment if you need to make time-sensitive payments. 

Transaction Charges

• Banks can set their charges, while the Reserve Bank of India charges nothing for NEFT services. 
• UPI could be a better option for very small transactions as it’s free. Note that the RBI has set a cap on NEFT charges.

Cool-off Period

• Once you add a beneficiary using mobile banking or net banking, you must wait a while before initiating fund transfer.
• You should wait for at least 30 minutes to 4 hours before you can start a fund transfer. 

Requires NEFT-enabled Banks

• To transfer funds via NEFT, the sender and receiver must have accounts in NEFT-enabled banks. 
• However, not all banks support NEFT, and quite a few small banks in the country do not. 

NEFT vs RTGS

The main difference between NEFT (National Electronics Funds Transfer) and RTGS (Real Time Gross Settlement) is how each payment system works. While NEFT means a payment system where transactions are processed in batches, RTGS is a payment system that settles transactions in real time. Here is a detailed overview of their differences:

NEFT is a convenient system of transferring funds from one bank account to another digitally. It offers a host of benefits, including its 24x7x365 availability, cost-effectiveness, ease of usage, and more. Even those without a bank account can use NEFT to transfer money via cash deposit at a bank. It’s an ideal option for quick and small fund transfers, whether you are sending a gift or paying tuition fees.

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