What is NEFT and how does it work?

NEFT stands for National Electronic Funds Transfer, which is a nationwide electronic payment system used to transfer funds between bank accounts in India. It was launched by the Reserve Bank of India (RBI) in 2005 as a secure, reliable, and efficient method for transferring funds between accounts in different banks.

NEFT works by using a deferred net settlement process, where all transactions are processed in batches, rather than realtime. This means that all transactions that are initiated before a certain cutoff time are batched together and processed together at specific intervals throughout the day.

To initiate a NEFT transaction, the sender needs to provide details of the beneficiary's bank account, including the name of the bank, the branch name and address, the account number, and the Indian Financial System Code (IFSC). Once the transaction is authorized, the funds are debited from the sender's account and credited to the beneficiary's account.

NEFT is available to all bank customers in India and can be used for a wide range of transactions, including the payment of bills, the transfer of money between individuals, and the payment of fees and taxes. It is a safe and reliable way to transfer funds, as all transactions are processed through secure channels and are monitored by the RBI.