NEFT (National Electronic Funds Transfer) is a nationwide electronic payment system operated by the Reserve Bank of India in which transfers between bank accounts are collected and settled in deferred net batches.
Why it matters
NEFT is a common way to move money between accounts at different banks, for example salaries, vendor payments and bill settlement. Because settlement is done in batches at fixed intervals rather than instantly per transaction, a transfer may take a short while to reach the beneficiary. Since December 2019 the RBI has made NEFT available around the clock on all days, though processing rules and charges depend on the bank.
Example
A business adds a vendor as a beneficiary using the vendor's name, account number and IFSC code, then initiates a transfer of 48,500. The remitting bank sends the instruction to the next NEFT batch. After settlement, the vendor's bank credits the account and the sender can see a UTR (unique transaction reference) for tracing.
Common mistakes
- Entering the wrong account number or IFSC. Recovery can be slow because the instruction was processed as given.
- Confusing NEFT with RTGS or IMPS. They differ in settlement style, speed and typical amounts.
- Ignoring the UTR. It is the reference both banks use to trace a transfer.
Rules, limits and fees vary by country and by bank; this entry is a definition only.
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