What is NEFT in Banking and How Does it Work?

NEFT stands for National Electronic Funds Transfer. It was launched by the Reserve Bank of India (RBI) in 2005 to facilitate seamless money transfers between bank accounts across India. Unlike traditional cheque-based transfers, NEFT transactions are quick, reliable, and processed in batches. It caters to individuals, businesses, and organisations, offering flexibility in transferring any amount, whether small or large.

Let’s explore the features, workings, benefits, and other key aspects of NEFT to understand why it remains a vital part of India’s financial infrastructure.

How Does NEFT Work?

NEFT operates on a batch-based system where transactions are settled at half-hourly intervals. Here’s a step-by-step overview of how NEFT transactions work:

1. Initiation: The sender initiates the transaction via internet banking, mobile banking, or by visiting the bank branch. Key details like the beneficiary's account number, bank name, and IFSC code are required.
2. Beneficiary Addition: If the beneficiary is new, their details must be added and approved.
3. Processing: The sender’s bank forwards the transaction to the NEFT clearing centre managed by the RBI, where it is grouped into batches.
4. Settlement: Transactions are settled in hourly batches, and the funds are transferred to the beneficiary’s bank.
5. Confirmation: Both sender and beneficiary receive notifications confirming the transaction.

NEFT transactions are generally completed on the same day, providing a secure and efficient fund transfer mechanism.

How to Initiate an NEFT Transaction?

Follow these steps for a seamless NEFT transaction:

1. Log in to your internet or mobile banking platform.
2. Navigate to the ‘Fund Transfers’ section and select NEFT.
3. Add the Beneficiary: Enter the beneficiary's account number, bank, and IFSC code. Ensure the information is correct. It usually takes around 30 minutes to add/activate beneficiary.
4. Enter the Amount: Specify the amount to be transferred.
5. Authenticate the transaction using OTP or your banking password.
6. Submit: Receive a confirmation message with the transaction ID for tracking.

What are the Details Needed to Add Beneficiary for NEFT Transactions?

To ensure a successful NEFT transfer, the following information is required:

• Beneficiary’s Name
• Bank Account Number
• IFSC Code of the beneficiary’s branch
• Bank Name and Branch Location
• Transfer Amount
• Sender’s Account Details

NEFT Fees and Charges

NEFT transfers or transactions done online doesn’t incur any charges. However, if you want to avail NEFT services through a bank, a nominal fee could be levied. We have considered Ujjivan Small Finance Bank’s NEFT charges:

• NEFT (inward/outward) via Mobile Banking or Net Banking: Nil
• NEFT (inward) via Bank Branch: Nil
• NEFT (outward) up to ₹10,000 via Bank Branch: ₹2.25
• NEFT (outward) up to ₹10,001 to ₹1 lakh via Bank Branch: ₹4.75
• NEFT (outward) up to ₹1 lakh to ₹2 lakh via Bank Branch: ₹14.75
• NEFT (outward) above ₹2 lakh via Bank Branch: ₹24.75

NEFT Transaction Limit

RBI has not set any cap on NEFT transactions, but individual banks may impose their own limits based on internal risk policies.

For Ujjivan Small Finance Bank, the daily transaction limit is capped at ₹10 lakh.

Features and Benefits of NEFT

1. 24/7 Availability: NEFT transfer done through online or net banking is available 24x7, 365 days a year, including weekends and holidays.
2. No Minimum or Maximum Limit: NEFT allows the transfer of any amount, making it ideal for small personal payments and large corporate transactions.
3. Secure Transactions: Robust encryption and authentication protocols ensure the safety of your funds.
4. Nationwide Coverage: NEFT is accepted by banks across India, enabling fund transfers to even the remotest branches.
5. Affordable: NEFT transactions conducted online are free of charge, while nominal fees may apply for branch-based transactions.
6. Cost-Effective: NEFT is one of the most economical fund transfer methods, especially when done online.
7. Safe and Reliable: Processed through secured banking channels, NEFT ensures high safety standards for both personal and business transactions.
8. No Minimum Transaction Amount: You can transfer as little as ₹1, making it accessible for all types of payments.
9. Convenient: Transactions can be initiated from the comfort of your home via internet or mobile banking.
10. Instant Confirmation: Both sender and recipient receive instant confirmation via SMS or email, ensuring transparency and trust.

NEFT Transaction Timings

Online NEFT operates round the clock (24/7), every day of the week, but transactions are processed in 48 half-hourly cycles or batches. However, NEFT services may have a temporary downtime during bank maintenance or upgrades. For NEFT done through Ujjivan Bank branch, please refer to the table below

NEFT vs RTGS