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Electronic Funds Transfer

Electronic banking (Internet – banking), also known as electronic fund transfer (EFT), uses computer and electronic technology as a substitute for cheques and other paper instruments. They refer to any transfer of funds that is initiated by electronic means such as an electronic terminal, computer, telephone, ATM magnetic tape, etc. EFTs are initiated through devices like cards or codes that allow account holders to authorize payments and access their account.


RBI EFT is a Scheme introduced by Reserve Bank of India (RBI) to help banks those who are offering their customers money transfer service from account to account of any bank branch to any other bank branch in places where EFT services are offered. Funds transfer is possible from any branch of these banks at the EFT centres to other branch of any bank at the EFT centres both inter-city and intra-city. To avail of these services a customer can approach the bank can issue instructions to make a payment either by making cash payment or authorizing his account to be debited. The customer has to give full details regarding whose account is to be credited including his bank account and bank. If the remitting bank transmits the funds transfer message to RBI so as to hit the first settlement at 12 noon, the receiving bank’s account will be credited by RBI at the destination centre and beneficiary gets the credit on Day 1 itself. If the same is included in subsequent settlements that are for 2 pm and 4 pm, the beneficiary gets credit on Day 2. As the scheme is retail in nature the maximum amount allowed per transfer is Rs. 100,000.

From the following we can understand how the system operates :

Step - 1

The remitter fills in the EFT Application form giving the particulars of the beneficiary (such as city, bank, branch, beneficiary’s name, account type and account number) and permits the branch to remit a specified amount to the beneficiary by raising a debit to the remitter’s account.

Step - 2

The remitting branch prepares a schedule and sends the duplicate of the EFT application form to its Service branch for the preparation of EFT data. If the branch is equipped with a computer system, data preparation can be done at the branch level in the specified format.

Step - 3

The Service branch prepares the EFT data file by using a software package given by RBI and transmits the same to the local RBI that is NCC (National Clearing Cell) to be included for the settlement of 12 noon, 2 pm and 4 pm.

Step - 4

The RBI at the remitting centre merges the files received from all banks, sorts the transactions city-wise and prepares vouchers for debiting the remitting banks on Day-1 itself. City-wise files will be transmitted to the RBI offices at the respective destination centres.

Step - 5

RBI at the destination centre receives these files from the originating centres, consolidates them and classifies them bank-wise. After that, bank-wise remittance data files are transmitted to banks on Day 1 itself. Bank-wise vouchers are prepared for crediting the receiving banks’ accounts the same day or in the next day.

Step - 6

On day 1or day2 morning the receiving banks at the destination centres process the remittance files transmitted by RBI and forward credit reports to the destination branches for crediting the beneficiaries’ accounts.

EFT is an improvement over the other facilities for a number of reasons. At present demand draft, mail transfer and telegraphic transfer are the primary modes of funds transfer. The demand draft facility is paper based. The remitter, after purchasing demand draft (DD) from a bank branch, dispatches the same by post/courier to the beneficiary. The beneficiary, in turn, lodges the draft to his/her bank for the collection and clearing. The time taken for completing this process will be about 10 days. In case of telegraphic transfer, fund reaches the beneficiary either on the same day or the next; but both the remitter and the beneficiary should have accounts in the same bank. On the other hand, RBI EFT system is an inter-bank oriented system. RBI acts as an intermediary between the remitting bank and the receiving bank and makes the inter-bank funds transfer possible. The customers of banks may request their respective branches to remit funds to the designated customers irrespective of bank affiliation of the beneficiary.

Deposits and Bank Accounts
Fixed deposits