Electronic Funds Transfer (EFT)

Electronic funds transfer (EFT) is the electronic transfer of money from one bank
account to another, either within a single financial institution or across multiple institutions,
via computer-based systems, without the direct intervention of bank staff. An electronic
funds transfer (EFT), involves the movement of money from one bank account to another
digitally. Also known as direct deposit, these transfers take place independently without any
involvement of bank employees. The digital transaction does not require heaps of
documentation. Owing to its simplicity, EFT has now become a predominant method of
transfer of funds. It is also the most easily accessible and direct method of payment. The rise
in usage of EFT is leading to the drop in usage of paper checks. They are quickly becoming
obsolete due to involved expenses, slower expedition, and overall effort. An EFT transfer
usually involves two parties: the sender and the receiver of funds.

The types of Electronic Funds Transfer are (EFT): NEFT, RTGS, IMPS, ATM, Debit Card, Credit Card,
etc.

NEFT, RTGS & IMPS

Different payment and settlement systems in India have made the task of transferring money
from one bank account to another easier and faster. A large number of banks, private
companies and government bodies along with others are adopting different payment and
settlement methods such as NEFT, RTGS and IMPS. This has helped in reducing the gap
between the entities and their customers and other concerned people. These methods are
fast, convenient and useful for documentation purposes. Account holders don’t have to wait
for days to receive money in their bank accounts as with the help of the latest digital payment
systems like NEFT, RTGS, and IMPS, money can be sent and received in an instant manner at
anytime from anywhere.

India currently has various methods to transfer money online such as digital wallets, UPI,
and more. However, the most commonly used online fund transfer method has been:

• National Electronic Funds Transfer (NEFT)

 • Real-Time Gross Settlement (RTGS)
• Immediate Mobile Payment Service (IMPS)

While NEFT and RTGS were introduced by RBI (Reserve Bank of India), IMPS was introduced
by National Payments Corporation of India (NPCI). Read further to learn more about these
three payment systems.

NEFT

National Electronic Funds Transfer (NEFT) is a payment system that facilitates one-to-one
funds transfer. Using NEFT, people can electronically transfer money from any bank branch
to a person holding an account with any other bank branch, which is participating in the
payment system. Fund transfers through the NEFT system do not occur in real-time basis
and the fund transfer settles in 23 half-hourly batches.

RTGS

Real-Time Gross Settlement (RTGS) is another payment system in which the money is
credited in the beneficiary’s account in real-time and on a gross basis. The RTGS system is
primarily meant for large value transactions that require and receive immediate clearing.
This Real Time Gross Settlement System (hereinafter referred to as the RTGS System), set
up, operated and maintained by the Reserve Bank of India (RBI) comprises of the RTGS
application, the Inter-Bank Funds Transfer Processor (IFTP) application and the RTGS
Member (RTGS Participant) Interface application. The RTGS and the IFTP applications will,
for the purposes of this document, be referred to as the Central System jointly.

IMPS

Immediate Mobile Payment Services (IMPS) is a real-time instant inter-bank funds transfer
system managed by National payment corporation of India. IMPS is available 24/7
throughout the year including bank holidays, unlike NEFT and RTGS.
NEFT, RTGS and IMPS payment systems were introduced to offer convenience and flexibility
to the account holders. To use these online fund transfer services, the remitter must have the
basic bank account details of the beneficiary. The bank account details include the
beneficiary’s name and bank’s IFSC. Though all three payment systems are used for funds
transfer, they exhibit a few differences.

Following are the differences between different payment systems:

• Fund Transfer Limit- The maximum and minimum amount of money allowed for
transfer by each payment system may differ. Therefore, fund transfer value is an
important factor in determining which fund transfer method will be appropriate for a
customer.

• Service Availability- Some of the payment systems are available for 24*7 while
others have specific timings. Payment systems that are available 24*7 allow remitters
 to initiate money transfers anytime and any day. However, the funds will settle only
when the service is available.

• Fund Settlement Speed- Different fund payment systems have different fund
settlement speeds. Fund settlement speed here is the total time consumed to settle
money from one account to another after the transfer has been initiated.

• Fund Transfer Charges- Transferring money involves charges. As per RBI, fund
transfer charges for each payment system are decided by banks. The amount charged
is based on the amount to be transferred, transfer speed, and other features offered
by the bank.

Centralized Funds Management System (CFMS)

The Centralized Funds Management System (CFMS), is a system set up, operated and
maintained by the Reserve Bank of India (hereinafter referred to as the ‘Bank’) to enable
operations on current accounts maintained at various offices of the Bank, through standard
message formats in a secure manner.

The CFMS comprises two components – the Centralized Funds Enquiry System (CFES) and
Centralized Funds Transfer System (CFTS). These have been made available through the
following sub-systems:

-The Apex Level Server (ALS),

-The Local Funds Management System (LFMS),
-The Bank Level Funds Management System (BLFMS), and,
- The Local Banks Funds Management System (LBFMS).

The ALS is the software component which resides in the mainframe computer systems
currently housed in at Mumbai, while the LFMS is the software component which would be
functioning from the server systems at the Regional Offices of the Bank where the Deposit
Accounts Department (DAD) is existent. The BLFMS is the software component provided by
the Bank to the members of the CFMS and would be used by the Treasury Department /
Central Accounts Department, while the LBFMS is the software component which would be
given by the Bank to the CFMS members for accessing the facilities.

National Financial Switch (NFS)

National Financial Switch (NFS) is the largest network of shared automated teller machines
(ATMs) in India. It was designed, developed, and deployed with the aim of inter-connecting
the ATMs in the country and facilitating convenience banking. The network was taken over
 by NPCI from Institute for Development and Research in Banking Technology (IDRBT) on
December 14, 2009. At the time of taking over of the network by NPCI, there were 37
members connecting about 50000 ATMs. Since then the network has grown many folds and
is now the leading multilateral ATM network in the country. As of 30th Apr’ 21, there were
1,181 members that include 107 Direct, 1,025 Sub members, 45 RRBs, and 4 White Label
ATM Operators (WLAOs) using NFS network connected to more than 2.52 Lac ATM
(including cash deposit machines/recyclers). NPCI has also tied up with International card
schemes like Discover Financial Service (DFS), Japan Credit Bureau (JCB), and China
UnionPay International (CUPI) which allows their cardholders to use ATMs connected to the
NFS network.
With the operational functions and services with in-house capabilities, the NFS network is
now at par with most of the global ATM networks. Apart from basic transactions like Cash
Withdrawal, Balance Enquiry, PIN Change, and Mini Statement, NFS also offers Value Added
Services (VAS) to the customers of the banks on ATMs/CDMs like Interoperable Cash Deposit
(ICD), Mobile Banking Registration (MBR), Card-to-Card Fund Transfer (C2C), Cheque Book
Request (CBR), Statement Request (SR) and Aadhar Number Seeding (ANS).

RuPay

Rupay is an Indian multinational financial services and payment service system, conceived
and launched by the National Payments Corporation of India (NPCI) on 26 March 2012. It
was created to fulfill the Reserve Bank of India's (RBI) vision of establishing a domestic, open
and multilateral system of payments. The main aim behind the card is to redefine payment
for public transport systems and retail ease of access, at the cutting edge of digital payments.
RuPay facilitates electronic payment at all Indian banks and financial institutions. NPCI
maintains ties with Discover Financial, JCB to enable RuPay card scheme to gain
international acceptance. RuPay is the first-of-its-kind domestic Card payment network of
India, with wide acceptance at ATMs, POS devices and e-commerce websites across India.
RuPay cards are available all over the country including urban and rural areas.

Benefits of RuPay Card

A brainchild of RBI, RuPay is exclusively crafted to meet the needs and requirements of Indian
customers. Here are some of the benefits that RuPay customers stand to get:
• Security of Information Related to Indians
Customer data and transaction details pertaining to RuPay card transactions will not be passed
outside India.
• Safe Transactions
With SMS alerts and notifications that are sent to the customer’s phone number after every
transaction, RuPay cardholders can be ensured of a secure transaction.
• Designed for India
RuPay cards have been customized keeping in mind the product and service requirements of
Indians.
• Greater Reach in Rural Areas
When it comes to the RuPay cards transactions, all the processing happens within the country. This
results in lower cost of settlement and clearing for the transactions made using RuPay debit card.
Banks will profit immensely from this as costs for transaction processing becomes affordable.
• Payment Solutions across Platforms
RuPay debit card is designed to provide complete interoperability between payment channels
including mobile technology, ATMs, cheques etc.

Banking Services

ATM Card

ATM stands for Automated Teller Machine. Similarly, ATM card is a PIN-based card issued
by a bank to account holders to use it for various purposes at the ATM. In addition to using
it at ATMs, account holders can use it to make purchases by entering the Personal
Identification Number (PIN). ATM cards are generally debit cards.

Debit Card

Debit cards are issued by your bank and work as a combination ATM card and credit card.
However, unlike a credit card, a debit card links directly to your bank account, using the
money you have on deposit to pay for your purchase or make your ATM withdrawal digitally.
Debit cards partner with major credit card brands, such as VISA, Mastercard and Discover,
to allow you to use your debit card for payment anywhere those branded cards are accepted.

While both debit cards and ATM cards allow the holder to access funds in his/her checking
account, but anyone can’t use an ATM card to make purchases. ATM card use is strictly
limited to transactions at an ATM.

Differences between an ATM card vs. a debit card vs. a credit card:

Feature ATM Card Debit Card Credit Card

Funds connected to bank account: Yes Yes No
Use anywhere of cards are accepted: No Yes Yes
Receive a bill and pay later: No No Yes
Charges interest: No No Yes
Affects credit score: No No Yes
Credit Card

Credit cards are rectangular pieces of plastic or metal that can be used to pay for new
purchases by swiping, tapping or inserting it into a card reader at checkout. Credit card is
issued with a credit limit, the limit is decided by the institution based on the customer’s
credit score and history. The key difference between a credit card and a debit card is that
when a person swipe a debit card, the money gets deducted from his/her bank account
whereas with a credit card the money is taken from the pre-approved limit. In order to keep
the account in good standing, the person need to pay at least the minimum amount by the
due date (which is the same date every month). Thankfully most cards offer grace periods,
which allow the holder to pay off the balance interest free for a minimum of 21 days from
the end of a billing cycle. Any lingering balances after the grace period will incur interest, so
it’s recommended to always pay the full amount.

IFTP

Inter Bank Fund Transfer is a facility that allows the person to transfer money from his/her
account with to an account in any other Bank, subject to the beneficiary's bank participating
in the RBI National Electronic Funds Transfer (RBI - NEFT) scheme. iFTP is built to allow the
Banks to calculate the funds transfer price for all banking transactions. It provides flexible
set of parameters which enables the Bank to define all the formulas of fund transfer prices
and allocated costs, and produce profitability analysis reports to help manage performance
at different levels of the bank. Fund Transfer Pricing and Cost allocation system, iFTP
supports the business operations by:

• Set the price of buying/selling internal capital in the bank.

• Define formulas and steps of cost allocation for departments.
• Provide a set of reports of cost-of-funds.
• Provide a set of reports for cost allocation

Negotiated Dealing System (NDS)

The Negotiated Dealing System, or NDS, is an electronic trading platform operated by
the Reserve Bank of India to facilitate the issuing and exchange of government securities
and other types of money market instruments. The goal was to reduce inefficiencies
stemming from telephone orders and manual paperwork, while increasing transparency for
all market participants.

The Negotiated Dealing System was introduced in February 2002 to help the Reserve Bank
of India, or RBI, enhance the dealings of fixed income investments. Prior to the NDS, the
country's government securities market was primarily telephone-based, which meant that
buyers and sellers had to place trades over the phone, submit physical Subsidiary General
Ledger transfer forms, and issue checks for the settlement of funds to the Reserve Bank of
India. These slow and inefficient procedures led to the development and implementation of
the NDS.