Electronic payments have become the norm, especially after demonetization. Banks offer several different options for transferring funds online. Such transfer of funds online is called Electronic Fund Transfer.
Electronic fund transfer is the transfer of money without the involvement of bank staff. Fund transfers can be done across multiple banks or in the same bank.
Types of Electronic fund transfer:
1. National Electronic Fund Transfer (NEFT):
This is the most popular mode of electronic funds transfer. In NEFT, transactions are settled in hourly batches throughout the day. The beneficiary has to first be added before money can be transferred. Banks may set daily limits for NEFT transactions. Charges for NEFT typically depend on the amounts transferred. NEFT fund transfer can be done either online or at the bank branch.
2. Real Time Gross Settlement (RTGS):
RTGS is a type of electronic fund transfer used for high value transactions. A typical RTGS transaction amount is above Rs. 2 lakhs. Each transaction via RTGS is settled individually which means the funds transferred are immediately credited to the other party’s account. The RTGS system is maintained by the RBI.
3. Instant Money Payment System (IMPS):
IMPS is a type of electronic funds transfer system started by the National Payments Corporation of India (NPCI). IMPS involves a mobile money identifier code, which when input, allows the user to transfer money. IMPS is available 24×7. It is now possible to transfer money directly via IMPS by using bank account number and IFSC code.
4. Unified Payment Interface (UPI):
This is also a type of electronic funds transfer system started by NPCI. To use UPI, a user has to create a unique UPI ID and set a code. While making a transfer, the user has to input the UPI ID of the recipient and the decided code and funds are transferred immediately.
5. SWIFT remittances:
These remittances are interbank transfers between countries. They are used for foreign exchange remittances.
Benefits of Electronic fund transfer:
1. Reduces time taken to make payments:
Electronic fund transfer is convenient and payment usually gets credited on the same day.
2. Hassle free process:
It reduces the effort taken to transfer funds. There is no need to personally visit the bank.
3. Provides a trail for payment:
All electronic fund transfers leave a trail on their transfer. This makes it easy to access the records from the bank and find out details about payments.
4. Cost effective to transfer funds:
Transferring funds has become very cheap using electronic fund transfers. The transaction costs for NEFT are almost negligible as compared to the time and effort to personally deposit cheques. UPI is a free mode of transferring money.