NEFT Explained

5 min read Bank Utils

What NEFT Is

NEFT stands for National Electronic Funds Transfer. It is a payment system maintained by the Reserve Bank of India that enables one-to-one fund transfers between bank accounts across India. Unlike RTGS which settles in real time, NEFT originally operated in hourly batches but has been available 24x7 since December 2019 with continuous processing.

How a NEFT Transfer Works

When you initiate a NEFT transfer, your bank bundles it with other outgoing transfers and sends them in batches to the NEFT clearing center operated by RBI. The clearing center sorts each instruction by destination bank and forwards them. The destination bank then credits the beneficiary account. The typical settlement time is within two hours on working days, and the system operates round the clock including weekends and holidays.

NEFT Transaction Limits

There is no minimum or maximum transaction limit for NEFT set by RBI at the system level. Individual banks may impose their own limits on retail NEFT transfers, often capping them at 10 lakh or 25 lakh per transaction through internet banking. For large amounts, RTGS is more appropriate as it settles individually in real time. The per-transaction charges are regulated by RBI and are low, making NEFT economical for small and medium transfers.

What You Need to Initiate NEFT

To send money via NEFT, you need the beneficiary's full name, account number, bank name, and IFSC code of the branch. You must add the beneficiary in your internet or mobile banking app, which typically involves a cooling period of 30 minutes to 24 hours before the first transfer. Once added, subsequent transfers to the same beneficiary can be done quickly.

NEFT vs IMPS vs RTGS

NEFT, IMPS, and RTGS are all RBI-operated transfer rails but suit different needs. NEFT is good for non-urgent transfers with no amount ceiling. IMPS (Immediate Payment Service) settles instantly and works 24x7 but has a 5 lakh cap per transaction in most banks. RTGS (Real Time Gross Settlement) settles instantly like IMPS but has a minimum threshold of 2 lakh, making it suited for large-value transfers.

Common NEFT Failure Reasons

A NEFT transfer fails most often because of an incorrect IFSC code, wrong account number, or a mismatch between the name and account. Transfers to accounts in banks not participating in the NEFT network also fail. When a transfer fails, the amount is returned to the sender's account within 24 hours. Always verify the IFSC and account number before confirming.