NEFT

National Electronic Funds Transfer (NEFT) is an electronic funds transfer system maintained by the Reserve Bank of India (RBI). Started in November 2005, NEFT is a facility enabling bank customers in India to transfer funds between any two NEFT-enabled bank accounts on a one-to-one basis. It is done via electronic messages. Unlike Real-time gross settlement (RTGS), fund transfers through the NEFT system do not occur in real-time basis. NEFT settles fund transfers in hourly batches (now 30 minutes batches)with 12 (Now 23 settlements)settlements occurring between 8:00 AM and 7:00 PM on week days. Transfers initiated outside this time period are settled at the next available window. No settlements are made on the second and fourth Saturday of the month or on Sundays.

NEFT facilities are available at 74,680 branches offices of 101 banks across the country (out of around 82,400 bank branches) as of January 2011, and well as online through the website of NEFT-enabled banks. and work on a batch mode. NEFT has gained popularity due to its saving on time and the ease with which the transactions can be concluded, This reflects from the fact that 42% of all electronic transactions in the 2008 financial year were NEFT transactions.

Detailed process NEFT is as follows

Step-1 : Customer fills an application form providing details of the beneficiary (like name, bank, branch name, IFSC, account type and account number) and the amount to be remitted. The remitter authorizes his/her bank branch to debit his account and remit the specified amount to the beneficiary. This facility is also available through online banking and some banks offer the NEFT facility even through the ATMs.

Step-2 : The originating bank branch prepares a message and sends the message to its pooling centre (also called the NEFT Service Centre).

Step-3 : The pooling centre forwards the message to the NEFT Clearing Centre (operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be included for the next available batch.

Step-4 : The Clearing Centre sorts the funds transfer transactions destination bank-wise and prepares accounting entries to receive funds from the originating banks (debit) and give the funds to the destination banks(credit). Thereafter, bank-wise remittance messages are forwarded to the destination banks through their pooling centre (NEFT Service Centre).

Step-5 : The destination banks receive the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary customers’ accounts.

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Wikipedia