National Electronic Funds

Transfer

National Electronic Funds Transfer (NEFT) is

an electronic funds transfer system maintained by
the Reserve Bank of India (RBI). Started in November
2005, the setup was established and maintained
by Institute for Development and Research in Banking
Technology. NEFT enables 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, fund transfers

through the NEFT system do not occur in real-time
basis. Previously, NEFT system settled fund transfers in
hourly batches with 23 settlements occurring between
00:30 hrs. to 00:00 hrs.

From 16 December 2019, there would be 48 half-hourly

batches occurring between 00.30 am to 00:00 am
every day regardless of a holiday or otherwise.

As of 30 November 2019, NEFT facilities were available

at 1,48,477 branches/offices of 216 banks across the
country and online through the website of NEFT-
enabled banks. NEFT has gained popularity due to the
ease and efficiency with which the transactions can be
concluded.
Process

Detailed process of NEFT is as follows

1. The customer fills up 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 also
offer the NEFT facility through ATMs.
2. The originating bank branch prepares a message and sends the
message to its pooling centre (also called the NEFT Service
Centre).
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.
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).

Settlement timings

NEFT transfers are settled in half-hourly batches every day between

00:30 am and 00:00 am all through the year.
NEFT originally settled fund transfers in hourly batches. The RBI
reduced clearance times to half-hourly batches in April 2016. In
August 2019, the RBI announced that it would enable round-the-clock
settlements from 16 December 2019.
Service charges

The structure of charges is as follows:

Inward transactions at destination bank branches (for credit to
beneficiary accounts):

 Free, no charges to be collected from beneficiaries

Outward transactions at originating bank branches (charges for the

remitter)

 With effect from 1 January 2020, banks have been advised to

not levy any charges from their savings bank account holders
for NEFT funds transfers initiated online.
 Maximum charges which can be levied for outward transactions
at originating bank for other transactions, i.e. offline
transactions (at bank branch through NEFT form), transactions
done through current/other accounts –
o For transactions up to ₹ 10,000: not exceeding ₹ 2.50 (+
Applicable GST)
o For transactions above ₹ 10,000 up to ₹ 1 lakh: not
exceeding ₹ 5 (+ Applicable GST)
o For transactions above ₹ 1 lakh and up to ₹ 2 lakhs: not
exceeding ₹ 15 (+ Applicable GST)
o For transactions above ₹ 2 lakhs: not exceeding ₹ 25 (+
Applicable GST)

The scenario varies from bank to bank, whether they levy this charge
or not immitted of the transaction done online or offline for the
accounts other than a savings bank account.
The RBI announced on 11 June 2019 that all charges for NEFT
and real-time gross settlement transactions collected from banks
would be waived from 1 July 2019, and asked banks to pass on the
benefits to customers (so RBI charges nothing for these transactions
to its member banks and the only charge that is levied is by the bank
through which the outward transaction is initiated).
Real-time gross settlement
Real-time gross settlement (RTGS) systems are specialist funds
transfer systems where the transfer of money or securities takes
place from one bank to any other bank on a "real-time" and on a
"gross" basis to avoid settlement risk. Settlement in "real time"
means a payment transaction is not subjected to any waiting period,
with transactions being settled as soon as they are processed. "Gross
settlement" means the transaction is settled on a one-to-one basis,
without bundling or netting with any other transaction. "Settlement"
means that once processed, payments are final and irrevocable.

History

As of 1985, three central banks implemented RTGS systems, while by

the end of 2005, RTGS systems had been implemented by 90 central
banks.
The first system that had the attributes of an RTGS system was the
US Fedwire system which was launched in 1970. This was based on a
previous method of transferring funds electronically between US
federal reserve banks via telegraph. The United Kingdom and France
both independently developed RTGS type systems in 1984. The UK
system was developed by the Bankers' Clearing House in February
1984 and was called CHAPS. The French system was called
SAGITTAIRE. A number of other developed countries launched
systems over the next few years In the 1990s international finance
organizations emphasized the importance of large-value funds
transfer systems which banks use to settle interbank transfers for
their own account as well as for their customers as a key part of a
country's financial market infrastructure. By 1997 a number of
countries, inside as well as outside the Group of Ten, had introduced
real-time gross settlement systems for large-value funds transfers.
Nearly all G-10 countries had plans to have RTGS systems in
operation in the course of 1997 and many other countries were also
considering introducing such systems.

Operation

RTGS systems are usually operated by a country's central bank as it is

seen as critical infrastructure for a country's economy. Economists
believe that an efficient national payment system reduces the cost of
exchanging goods and services, and is indispensable to the
functioning of the interbank, money, and capital markets. A weak
payment system may severely drag on the stability and
developmental capacity of a national economy; its failures can result
in inefficient use of financial resources, inequitable risk-sharing
among agents, actual losses for participants, and loss of confidence
in the financial system and in the very use of money.
RTGS system does not require any physical exchange of money; the
central bank makes adjustments in the electronic accounts of Bank A
and Bank B, reducing the balance in Bank A’s account by the amount
in question and increasing the balance of Bank B’s account by the
same amount. The RTGS system is suited for low-volume, high-value
transactions. It lowers settlement risk, besides giving an accurate
picture of an institution’s account at any point in time. The objective
of RTGS systems by central banks throughout the world is to
minimize risk in high-value electronic payment settlement systems. In
an RTGS system, transactions are settled across accounts held at a
central bank on a continuous gross basis. The settlement is
immediate, final, and irrevocable. Credit risks due to settlement lags
are eliminated. The best RTGS national payment systems cover up to
95% of high-value transactions within the national monetary market.
RTGS systems are an alternative to systems of settling transactions at
the end of the day, also known as the net settlement system, such as
the BACS system in the United Kingdom. In a net settlement system,
all the inter-institution transactions during the day are accumulated,
and at the end of the day, the central bank adjusts the accounts of
the institutions by the net amounts of these transactions.
There are several reasons for central banks to adopt RTGS. First, a
decision to adopt is influenced by competitive pressure from the
global financial markets. Second, it is more beneficial to adopt an
RTGS system for the central bank when this allows access to a broad
system of other countries' RTGS systems. Third, it is very likely that
the knowledge acquired through experiences with RTGS systems
spills over to other central banks and helps them make their adoption
decision. Fourth, central banks do not necessarily have to install and
develop RTGS themselves. The possibility of sharing development
with providers that have built RTGS systems in more than one
country (CGI of UK holding the IP, CMA Small System of Sweden, JV
Perego of South Africa, SIA S.p.A. of Italy and Montral of USA) has
presumably lowered the cost and hence made it feasible for many
countries to adopt.
Existing systems

World map with main systems used for

large-value payments
Below is a listing of countries and their RTGS systems:
Country System

PAPSS (Pan-African Payment and Settlement

African Union
System)

SPTR (Portuguese: Sistema de pagamentos em

Angola
tempo real; Real-time Payment System)

MEP (Spanish: Medio electrónico de pagos;

Argentina
Electronic Means of Payment)

Azerbaijan AZIPS (Azerbaijan Interbank Payment System)

RITS (Reserve Bank Information and Transfer

Australia
System)

Bahrain RTGS (Real Time Gross Settlement System)

RTGS (Bangladesh Bank Payment Service

Bangladesh
Division)

CBRTGS (Central Bank Real Time Gross

Barbados
Settlement System)

Bosnia and RTGS

Country System

Herzegovina

Belarus BISS (Belarus Interbank Settlement System)

Bulgaria RINGS (Real-time Interbank Gross Settlement)

STR (Portuguese: Sistema de Transferência de

Brazil
Reservas; Reserves Transfer System)

Canada Lynx

China CIPS (Cross-Border Interbank Payment System)

LBTR/CAS (Spanish: Liquidación Bruta en Tiempo

Chile
Real; Real-time Gross Settlement)

TEF (Spanish: Transferencia Electrónica de

Costa Rica
Fondos; Electronic Funds Transfer)

CERTIS (Czech Express Real Time Interbank Gross

Czech Republic
Settlement System)

Denmark KRONOS2

Dominican LBTR (Spanish: Liquidación Bruta en Tiempo

Republic Real; Gross Settlement in Real Time)

Egypt RTGS

TARGET2 (Trans-European Automated Real-time

Eurozone
Gross Settlement Express Transfer 2)

Fiji FIJICLEAR

CHATS (Clearing House Automated Transfer

Hong Kong
System)
Country System

VIBER (Hungarian: Valós Idejű Bruttó Elszámolási

Hungary
Rendszer; Real-time Gross Settlement System)

Georgia GPSS (Georgian Payment and Securities System)

India RTGS

BI-RTGS (Bank Indonesia Real Time Gross

Indonesia
Settlement System)

Iran SATNA (Real-Time Gross Settlement System)

Iraq RTGS (Real Time Gross Settlement System)

Zahav (Hebrew: Zahav Real-time Credits and

Israel
Transfers)

BOJ-NET (Bank of Japan Financial Network

Japan
System)

Jordan RTGS-J

KEPSS (Kenya Electronic Payment and Settlement

Kenya
System)

BOK-WIRE+ (The Bank of Korea Financial Wire

Korea
Network

KASSIP (Kuwait's Automated Settlement System

Kuwait
for Inter-Participant Payments)

BDL-RTGS (Banque Du Liban – Real Time Gross

Lebanon
Settlement)

Macao RTGS

Malawi MITASS (Malawi Interbank Settlement System)

Country System

RENTAS (Real Time Electronic Transfer of Funds

Malaysia
and Securities)

MACSS (Mauritius Automated Clearing and

Mauritius
Settlement System)

SPEI (Spanish: Sistema de Pagos Electrónicos

Mexico Interbancarios; Interbank Electronic Payment
System)

SRBM (Système de regalement brut du Maroc;

Morocco
Moroccan Gross Settlement System)

Namibia NISS (Namibia Interbank Settlement System)

New Zealand ESAS (Exchange Settlement Account System)

Nigeria CIFTS (CBN Inter-Bank Funds Transfer System)

North
MIPS (Macedonian Interbank Payment System)
Macedonia

Pakistan RTGS (Real Time Gross Settlement System)

LBTR (Spanish: Liquidación Bruta en Tiempo

Paraguay
Real; Gross Settlement in Real Time)

LBTR (Spanish: Liquidación Bruta en Tiempo

Peru
Real; Gross Settlement in Real Time)

Philippines Philp’

Poland SORBNET[37] and SORBNET2

Qatar QPS (Qatar Payment System)

Country System

BESP System (Banking Electronic Speed Payment

Russia
System)

Romania Regis

Saudi Arabia SARIE (Saudi Arabian Riyal Interbank Express)

Singapore MEPS+ (MAS Electronic Payment System Plus)

SAMOS (The South African Multiple Option

South Africa
Settlement)

Sri Lanka Lanka Settle (RTGS/SSSS)

RIX (Swedish: Riksbankens system för överföring

Sweden
av kontoförda pengar)

Switzerland SIC (Swiss Interbank Clearing)

Taiwan CIFS (CBC Interbank Funds Transfer System)

Système de Virements de Gros Montana

Tunisia
Tunisian (SGMT)

Tanzania TIS (Tanzania Interbank Settlement)

BAHTNET (Bank of Thailand Automated High

Thailand
Value Transfer Network)

Turkey EFT (Electronic Fund Transfer)

SEP (System of Electronic Payments of the

Ukraine
National Bank of Ukraine)

United CHAPS (Clearing House Automated Payment

Kingdom System)
Country System

United States Fedwire

Uganda UNIS (Uganda National Interbank Settlement)

Vietnam IBPS

ZIPSS (Zambian Interbank Payment and

Zambia
Settlement System)

ZETSS (Zimbabwe Electronic Transfer and

Zimbabwe
Settlement System)

UAE UAEFTS (UAE Funds Transfer System)

In 2010, the World Bank published a report on payment systems
worldwide, which investigated these countries' usage of real-time
gross settlement systems for large-value payments.