The Hindu Business Line : NEFT facility not available to all banks

Despite the Reserve Bank of India’s wish to have all large payments in the banking system routed through electronic mode, i.e. either Real Time Gross Settlement (RTGS) or National Electronic Fund Transfer (NEFT) or both, it is learnt that the central bank is not in a position to extend the NEFT facility to all banks.

Only those banks having direct membership of the Mumbai Clearing House are eligible for participating in NEFT. This means that the banks not having a branch in Mumbai will not be able to avail themselves of the facility.

This is because NEFT inter-bank settlement is being done on the basis of nine digits MICR codes (400BB001) that starts with the city code 400, i.e. Mumbai. As a result, the banks not having any branch in Mumbai will not be able to participate in transactions through NEFT. However, there is no such requirement for settlement through RTGS.

Other banks

The RTGS facility is available for transactions above Rs 1 lakh. For less than Rs 1 lakh, there is NEFT facility.

A large number of State co-operative banks as well as smaller private banks concentrated in other regions and States having large customer base but not branches in Mumbai will thus be unable to access the NEFT facility. Several of them have already taken up the matter with the RBI, as their customers are facing difficulties.

Interestingly, some of these banks are members of RTGS. Therefore, the RBI has taken up the matter with the department concerned, it is learnt.

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