Electronic Fund Transfer Meaning
Electronic Fund Transfer – Meaning and Process Explained!
- Electronic Fund Transfer (EFT) is an RBI-backed Electronic Payment System.
- EFT enables the transfer of money via electronic mediums, reducing the dependence on cash or cheque transfers.
- Your fund transfer request goes through several entities before reaching the beneficiary.
- The National Clearing Cell (NCC) settles the fund transfer before transmitting the EFT data to the receiving bank.
- EFT is time-saving and cost-effective.
The banking sector and its customers have benefitted the most from the invention of the internet. Gone are the days when you had to visit the bank for every transaction, no matter how big or small. A simple five minutes chore would take half a day. Today, thanks to the Electronic Fund Transfer facility, you can transfer money to any bank account without ever stepping out of the house. Read on to know more about ETF and how it works.
Electronic Fund Transfer – Meaning
Introduced in 1990 by the Reserve Bank of India (RBI), Electronic Fund Transfer (EFT) is the transfer of funds via electronic channels. EFT allows intra-bank and inter-bank transfers in a time-saving and cost-effective manner. Today, EFT has been replaced by a more efficient payment system – the National Electronic Fund Transfer, widely known as NEFT.
How Does Electronic Fund Transfer Work?
With the Electronic Fund Transfer System, the online fund transfer is helmed by a few crucial parties. These include the sending bank, the sending service branch, the sending EFT centre, the receiving EFT centre, and the receiving service branch at the beneficiary bank. The below steps explain how EFT works.
- You place a fund transfer request in your bank.
- The sending bank consolidates all such fund transfer requests and sends them to the service branch.
- The service branch transmits data to the EFT – the National Clearing Cell (NCC), which is an automated clearinghouse.
- The NCC transmits the EFT data to another NCC on the receiver end.
- The receiving NCC processes the data and forwards it to the beneficiary bank.
- The bank branch credits the beneficiary account on the same business day of receiving the transfer request.
Benefits of EFT System
Having explained EFT meaning in banking, let us examine its many noteworthy benefits. The most apparent ones are as under:
24 x 7 Availability
You can place an EFT request 24x7x365. The RBI notifies banks and customers in case services are halted.
EFT enables you to send funds to beneficiary accounts on a real-time basis.
Since most banks are EFT-enabled, the process of transferring funds to any corner of the country has now become hassle-free.
The RBI does not levy fees on banks for EFT. Banks, too, pass on this benefit to their customers for online ETF services but may impose nominal charges for offline ETF payments.
Versatile Payment System
EFT is limited not only to fund transfers, but you may also use this facility to pay your credit card dues and loan EMIs, initiate inward foreign remittances and so on.
Now that you know ETF payment meaning, you can utilise this facility for your everyday banking transactions. ETF is a time and money-saving facility. With a bit of assistance from an internet-enabled device like a smartphone or computer, you can initiate almost all kinds of transactions with the click of a few buttons.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.