How NEFT works?

This is the fourth post in the series of Jargons of Online Banking.

In last blog, I made a note of some FAQs for NEFT. Let's explore now how NEFT works in detail.

NEFT works as following:

Sender has to provide details of the intended receiver to the bank. This is usually done by "Adding the Payee" in online banking link.

Sender has to initiate the funds transfer either online or by filling in the form available at the bank branch.

Bank prepares a message and sends it to its pooling center in Mumbai.

Pooling center sends it to NEFT clearing center (operated by RBI, Mumbai) so that it can be processed in next batch.

NEFT clearing center sorts the request destination-bank wise and prepares to receive funds from originating bank and give them to destination bank.

Messages are forwarded to destination banks through their pooling center.

Destination banks processes the messages and credits the receiver accounts.

Click on the picture below to see the flowchart of this flow.