Mumbai, Nov. 21
THE Reserve Bank of India said it has commenced the live operation of the National Electronic Funds Transfer (NEFT) from today.
This system will enable retail customers to transfer funds instantly, provided the issuing bank and receiving bank are part of the NEFT system, said banking officials.
As of now, it takes seven days for funds to be transferred in an inter-city transfer and three days for an intra-city transfer. Now, with NEFT, funds will be transferred on the same day.
To begin with, there will be a single settlement every day at 12 noon and eight banks will participate in the live run, RBI said in a press release.
The eight banks participating in the first phase are: Canara Bank, Bank of Baroda, Punjab National Bank, Dena Bank, ABN-Amro Bank, HSBC, ICICI Bank and HDFC Bank. On the first day, however, only five of these banks participated.
It is expected that all banks participating in the System Electronic Funds Transfer (SEFT) will join NEFT by December. In the initial phase, NEFT will replace the SEFT system. In future, NEFT will be the major clearing system for all retail payments, the release said.
"The objective of the NEFT system is to establish an Electronic Funds Transfer system to facilitate an efficient, secure, economical, reliable and expeditious system of funds transfer between banks in the banking sector," the release said.
Until now, only high value transactions were possible instantly through Real Time Gross Settlement. Now, even small depositors can enjoy the facility of instant transfer.
NEFT is part of RBI's initiatives to reduce risks in payment systems, especially settlement and systemic risks.
In the NEFT system, remittance transactions move electronically from end to end, unlike the EFT system where transmission of remittance transactions is not necessarily electronic from end to end.
Therefore, NEFT covers only the networked branches anywhere in the country, while EFT system covers all branches at 15 identified centres. RBI plans to migrate fully to NEFT system when optimum number of branches at the 15 centres gets NEFT enabled, the press release said.