Fund transfers have gone through a massive transformation with the rise of Digital Banking. The reliance on cash, cheques, and demand drafts has reduced as people find support through convenient modes of online transfers. Digital fund transfers are easy and quick to do without much human involvement. They can also be done remotely without any need to engage with the banking staff.
It can also be done without visiting the bank branch nowadays. These transfer mediums can be done using Net Banking and a Banking app. There are two popular types of fund transfers, National Electronic Fund Transfer and Real Time Gross Settlement. Both modes are used to transfer funds from one person to the other. The Reserve Bank of India maintains them.
Let us learn in-depth about NEFT meaning and how it works. NEFT uses electronic messages to transfer funds between two accounts. However, these transfers do not happen in real-time. The transfer message from one bank gets cleared in batches based on the clearing system, and the funds are then credited to the recipient’s account. You need to request an NEFT transfer with your bank and add the recipient’s details.
Once the NEFT transfer request reaches the bank, it checks whether the sender’s account has enough funds for the transfer. The transfer gets rejected if the account does not have enough funds. The bank sends a message to the NEFT Service Centre if there are enough funds. They aggregate the message and send it to the RBI’s NEFT Clearing Centre. This centre sorts the fund transfer requests from different banks. It prepares to account entries based on these fund transfer requests.
These entries debit the sender bank and credit the recipient bank. RBI waived off NEFT charges since December 2019. Banks have been asked to use such means of fund transfer free from January 2020. This has reduced the cost of transferring funds. The maximum transfer amount using NEFT is Rs. 2 lakh. This can be initiated multiple times in a day. Now you know what NEFT means, let us understand the process better.
- Firstly, add your beneficiary to the account. Input specific details of the beneficiary, such as:
- Beneficiary name
- Bank Account number
- Bank branch IFSC code
- Once the beneficiary details are added, the bank verifies the details. The beneficiary gets added within an hour.
- Once done, you can make NEFT transfers. However, fund transfer limits apply for the first 24 to 48 hours, depending on the bank.
- To initiate the NEFT, select the beneficiary, add the transfer amount, select the account, and submit to the bank. The procedure is the same for Mobile Banking
- The bank could ask for further verification, such as an OTP or an answer to a secret question, to verify whether you did the transaction. Once the verification gets done, the NEFT is submitted for clearance. Depending on when the transfer is done, it gets cleared in batches, and the funds are credited to the recipient.