NEFT is one of the most popular and trusted ways of fund transfer in India. Since its advent in 2005, it has securely completed hundreds of transactions nationwide. However, not many people are aware of how it works and its features. In this blog, we will discuss how NEFT transfer works, its features and what sets it apart from other methods.
What is NEFT in Banking?
NEFT full form in banking stands for National Electronic Fund Transfer. It is operated by the Reserve Bank of India (RBI) and was introduced in 2005, making it one of the most convenient transaction modes. It is a centralised and nationwide system where users can individually send money from one bank to another.
How Does NEFT Transfer Work?
As the name suggests, NEFT transfers funds electronically. It utilises the DNS or Deferred Net Settlement method and settles transactions in batches. These transactions are settled in intervals throughout the day.
Here is how a NEFT transaction usually takes place:
- Initiating Fund Transfer Request: A sender initiates a fund transfer request either through mobile banking or by visiting the branch. In this step, the sender provides the bank with the remitter’s and beneficiary’s details such as IFSC code, bank account number, branch name, etc.
- Processing of the Transaction: The bank then forwards the fund transfer request to an NEFT service centre. After that, it forwards all requests to the NEFT clearing centre in Mumbai.
- Transaction Settlement: In this step, the service centre sorts all requests in batches.
- Money is Credited to the Beneficiary’s Account: NEFT central system sends simultaneous messages to the beneficiary and remitter’s bank to credit and debit the amount from the respective accounts.
- Confirmation Messages: Once the transaction is complete, both parties get a confirmation message from their banks.
Advantages of NEFT
National Electronic Fund Transfer is one of the most convenient and traditional ways of payment. Here are some of the key benefits of NEFT transfer:
- All-time Availability: One of the most convenient features is its 24*7 availability.
- No Transfer Limit: RBI has not set any transaction limit for NEFT, indicating you can send or receive any amount of money easily.
- Minimal Nominal Fees: NEFT offers a cost-effective solution to money transfer. Banks charge minimal transaction fees for NEFT transfers.
- DNS Method: NEFT operated using the DNS method. This means that transactions are not processed in real-time and cleared batch-wise.
- Timeliness: Since NEFT operates in hourly batches, these transactions are completed in hours.
- Convenient: There are multiple ways through which you can transfer money through NEFT. You can choose to do it online or offline.
Difference Between NEFT and Other Fund Transfer Methods
NEFT is not the only transfer method available in India. There are other transfer methods, such as RTGS (Real Time Gross Settlement) and IMPS (Immediate Payment Service). Let us explore the differences between these transaction methods:
| Basis of Difference | NEFT | RTGS | IMPS |
| Settlement Time | Batch wise, 1-2 hours | Instant transfer | Instantly |
| Minimum Transfer Value | ₹1 | ₹2,00,000 | ₹1 |
| Maximum Transfer Value | No limit | No limit | ₹5,00,000 |
| Payment Mode | Online and offline | Online and offline | Online |
| Availability | 24*7 | 24*7 | 24*7 |
| Ideal For | Small fund transfer | High-volume fund transfer | Quick transfer |
Are There Any Charges and Limits in NEFT Transactions?
According to the RBI, NEFT transactions do not have any limit. However, banks may impose limits in order to ensure safety and reduce risks.
Banks do not charge any fees for inward transactions. In 2019, the RBI stopped levying process fees for outward transactions. The maximum charges that banks can levy on originating banks are:
- Transactions up to ₹10,000: Not more than ₹2.50 + Applicable GST.
- Transactions above ₹10,000 and up to ₹1 lakh: Not more than ₹5 + Applicable GST.
- Transactions above ₹2 lakh and up to ₹2 lakh: Not more than ₹15 + Applicable GST.
- Transactions above ₹ 2 lakh: Not more than ₹25 + Applicable GST.
Methods of NEFT Transaction
You can use the NEFT transfer method either through online mode or offline mode.
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Offline Method
In order to transfer money by NEFT in offline mode, you need to visit your nearest bank branch and fill out an NEFT form. Fill out the form by giving your name, date and branch name along with other essential details. After that fill out the details of the beneficiary and sign the form. Submit the form along with the cheque or cash.
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Offline Method
You can easily access NEFT transfer online by following the below steps:
- Log in to your bank’s net banking portal or open the mobile banking app.
- Find the fund transfer option within the app. It can be labelled as ‘Pay’, ‘Fund Transfer’, ‘Payment’, etc.
- Click on the NEFT option and choose when you want to initiate the transaction.
- Next, click on add beneficiary and enter the beneficiary details such as name, account number, bank name and IFSC code.
- The bank will send you an OTP to confirm the transaction. Enter the OTP.
- After the completion of the transaction, your bank will send you an SMS or email.
NEFT Transfer Timings
NEFT transfers in India are accessible 24×7, covering weekends and public holidays. Transactions are settled in half-hourly batches throughout the day. Although the service operates round the clock, the completion time for a transfer may vary—typically up to 2 hours, and occasionally longer during bank holidays or periods of system maintenance.
Final Words
NEFT upholds RBI’s continued promise to serve India’s payment procedure. It is a centralised method offering a host of benefits. NEFT is an ideal choice for everyone due to its 24*7 availability, ease of usage and cost-effectiveness.
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