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What is the full form of NEFT?

By Anushree Goswami Last updated : April 20, 2024

NEFT is an abbreviation of the National Electronic Funds Transfer. It is an Indian system of electronic transfer of money introduced by the Reserve bank of India. It is an electronic fund transfer system that is based on Deferred Net Settlement (DNS) which settles transactions in batches. It is begun in November 2005; the system of the framework was established and maintained by the Institute for Development and Research in Banking Technology (IDRBT).

To take participation in NEFT fund transfer from one bank to another, a bank branch must be NEFT-enabled. It acquires generally one day to transfer through NEFT, the fund from one account to the recipient account. According to the guiding principle of the RBI, settlements, and clearance of the transferred funds take place in batches.

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Requirements before using NEFT

The following given information, a bank's customer must have before using NEFT, which comprises:

• Name and full Bank account number of the recipient to whom, a person wants to transfer money.
• Indian Financial System Code (IFSC) of the recipient Bank/Branch.

Procedure of NEFT

Following given below is the complete procedure of NEFT in detail:

• The client fills up an application form by providing the details of the recipient, which are name, bank, branch name, IFSC, account type and account number and the amount to be sent. The sender permits his/her bank branch to debit from his bank account and send a particular amount to the recipient. This service is also available through online banking, and some of the banks also provide the NEFT facility through ATMs.
• The bank branch which had initiated the transaction puts in order a message and sends the message to its pooling center, which also called the NEFT Service Centre.
• The pooling center moves ahead of the message to the NEFT Clearing Centre which is controlled by National Clearing Cell, Reserve Bank of India, Mumbai, to be incorporated for the next existing batch.
• The Clearing Centre classifies the fund's transfer transactions destination bank-wise and puts in order accounting entries to accept funds from the originating banks (debit) and offer the funds to the destination banks (credit). Subsequently, bank-wise transfer of funds messages are forwarded to the destination banks through their pooling center (NEFT Service Centre).
• The destination banks obtain the inward transfer of funds messages from the Clearing Centre and forwards further the credit to the recipient patron’s accounts.