National Electronic Funds Transfer (NEFT)

NEFT is a nationwide electronic funds transfer system for one-to-one bank transfers, typically used for retail transactions. It was introduced by RBI in November 2005 as a replacement for the earlier EFT system.

NEFT enables individuals, firms, and corporates to transfer money from any bank branch to any other bank branch in India that participates in the NEFT network.

Features and Process

NEFT works on a deferred net settlement basis, processing transactions in batches. Since December 2019, NEFT operates 24×7 on all days, with 48 half-hourly batches each day. This means transfer requests are pooled and settled in intervals (every 30 minutes) rather than in real time.

When a customer initiates a NEFT transfer (via online banking or at a branch), the instruction is sent to the bank’s NEFT Service Centre, then to the NEFT Clearing Centre (managed by RBI) which sorts transactions by destination bank and settles the debits/credits for each batch. The receiving bank’s NEFT centre then credits the beneficiary’s account. The Indian Financial System Code (IFSC) is used to identify each bank branch and route the funds correctly.

Timings

Initially, NEFT operated only during bank working hours (e.g. 8:00 AM to 6:30 PM on weekdays), but it is now available 24 hours a day, 365 days a year. In case the NEFT system is unavailable (e.g. technical downtime), RBI issues prompt alerts to participants. Transactions queued during off-hours are simply processed in the next available batch once service resumes.

Limits

RBI imposes no minimum or maximum amount for NEFT transfers – even small values can be sent, and there is no upper ceiling. (Individual banks may set their own risk-based limits for their customers.) This flexibility makes NEFT suitable for a wide range of payments, from everyday personal transfers to higher-value transactions.

One exception is for cash-based remittances: even non-account holders can deposit cash at a branch to send via NEFT, but such cash remittances are limited to ₹50,000 per transaction. NEFT also facilitates one-way transfers to Nepal under the Indo-Nepal Remittance Facility, subject to certain limits and charges.

Settlement and Charges

NEFT settlements between banks are managed by RBI. At each batch interval, RBI’s NEFT Clearing Centre nets the transactions and updates banks’ accounts. This deferred net settlement means that while customers experience a short delay (funds are typically credited within the next cycle or two), the system is highly efficient for bulk handling.

Since July 2019, RBI has waived its processing charges on banks for NEFT, and from January 2020 banks have been instructed not to levy any fees on online NEFT transactions for savings account holders.

Thus, NEFT transfers initiated via internet or mobile banking are usually free of charge for customers. Even when charges apply (for offline transactions at branches, etc.), RBI caps the fees – for example, a bank can charge at most ₹2.50 for transfers up to ₹10,000, and up to ₹25 for amounts above ₹2 lakh. NEFT transactions carry legal backing and are safe, as all messages travel over secure bank networks.

RBI’s Role

The NEFT system is owned and operated by the RBI, which ensures security and efficiency in the clearing process. RBI maintains the central processing infrastructure, settles interbank dues, and issues operational guidelines.

By managing NEFT, RBI guarantees that payments are final and irrevocable once settled. It also periodically upgrades NEFT’s capabilities (e.g., increasing frequency of batches, extending operating hours) to enhance the system. All member banks must adhere to RBI’s NEFT procedural guidelines, and RBI provides the list of participating bank branches and IFSC codes for public reference.

Usage

NEFT is widely used for a variety of purposes – personal fund transfers, credit card bill payments, loan EMIs, business payments, etc.. The broad accessibility (any individual or corporate with a bank account can use it) and the absence of amount limits have made NEFT one of the most popular electronic payment methods in India. It strikes a balance between speed and cost, serving non-urgent transfers well at no or low cost. As of today, virtually all banks in India are part of the NEFT network, enabling seamless country-wide money transfers at the click of a button.