Wednesday, January 20, 2010

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.

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