The Role of IT, EFT, RTGS, NEFT, IFSC Code and Internet in the Indian Banking System
The advent of information technology and the massive gains of IT in everyday life have totally changed the lifestyle of people. There is not a single field that has not seen the impact of technological advancement, and people cannot hope to perform many critical tasks without IT products and services.
Modernization in the Indian Banking system
The banking system in India has also seen the tremendous impact of the innovative IT technologies. Many banks, that have replaced traditional paper system by the electronic technologies for their day-to-day working are surprised to find complete surge in their performances and functions, competencies, savings in salaries and branch managing, fund transfers and better services.
Today, better education and higher earning options among the customers have also made it necessary for banks to update their systems with innovative and advance technologies to pace with the growing wealth and demand of customers for better and prompt facilities and services. These days, the customers do not want to waste their valuable time standing and waiting in a queue and run from desk to the desk to complete their bank related tasks.
Internet is one of the significant discoveries of the IT technology. The banking payment mechanism is more modernised and function more efficiently and conveniently today than it was few years back. More and more people are turning to net banking for sending and receiving their payments because the funds reach the beneficiary bank and customer promptly and securely through Electronic Fund Transfer (EFT) system. The system also offers safe and secure mode of fund transfers, and the customer remitting the fund is also intimated by the bank as soon as the account of the recipient is credited in the beneficiary’s bank branch.
Internet Banking or net banking can be defined as banking services provided over Internet by the banks. Many banks these days offer various services such as bill payments, funds transfer, account management, keep track on their day-to-day transactions, and a lot many other useful services on Internet. The banks are also able to increase their customer base and promote their products and services among the customers and net banking users. One just needs a computer with Internet connection to get connected to a certain bank website and complete various bank related tasks. Now-a-days, many people also conduct their net banking through their mobile sets, integrated with Wi-Fi or 3G connection.
The importance of Internet banking is better understood by the facts that users can easily deposit or withdraw funds from their accounts, keep tabs on account transactions, request for bank statements, find out account balance, transfer funds, and numerous other transactions and functions through net banking. The Electronic Fund Transfer (EFT) is the essence of net banking. Both fund transferring systems, RTGS and NEFT require Internet and EFT for safe money transfer.
The National Electronic Funds Transfer (NEFT) system is used throughout the country for payments transfer. The system is regulated by the Reserve Bank of India (RBI). Individuals, firms, corporate and companies can use this system to receive and send payments. Once the funds are transferred, the beneficiary bank credits the account of beneficiary account holder. Few important facts on NEFT system include:
- There is no upper or lower limit for funds transfer, but per transaction transfer is limited to Rs. 50,000.
- The settlement continues for 6 days, with 12 settlements on week days and six settlements on Saturday.
- Settlements are operated on hourly batches (8 am to 7 pm – Monday to Friday) and Saturdays (8 am to 1 pm).
- The fund remitting customer has to fill up an RTGS/NEFT fund remit Application form, filled with the beneficiary details as demanded by the bank for transferring payments to beneficiary’s account.
- IFSC Code is a crucial ingredient of one-to-one inter-bank funds transfer systems, and in the absence of this Code on the Application Form the money transfer is not processed.
Similar to NEFT system, the 'RTGS', acronym for Real Time Gross Settlement system is also used for sending and receiving higher amount fund through EFT system. The higher value funds are transferred in “real time” and on “Gross basis”. The bank will request certain beneficiary details, including IFSC Code of the beneficiary bank from the payment remitter.
The crucial points of RTGS system include:
• There is a minimum limit of rupees 2 lakhs for money transfer.
• The fund transfer transaction is not bunched with other transactions in Gross basis, but processed individually and immediately in real time, within 2 hours, once the instruction is received.
• There is no set time for the transaction process but the process continuous throughout the business hours.
• The remitting customer gets the confirmation in the form of e-mail or sms from his bank once the account of fund recipient’s account is credited in the beneficiary bank.
The NEFT/RTGS fund remittance Form
The remitting customers must provide certain Beneficiary’s details to facilitate payment transfer through NEFT/RTGS systems. These details are mandatory and must be filled on the NEFT/RTGS fund remittance Form supplied by the concerned bank.
1. Name of the account holder
2. Account Name
3. Account (Savings or Current)
4. Remitting Amount
5. Beneficiary Bank’s Name
6. Branch name
Indian Financial System Code is identification of a bank’s branch and constitutes 11 digits. The digits are unique alpha-numeric characters, of which first 4 alphabets identify a bank, the concluding 6 digits are either numeric or alpha-numeric and identify bank branch. The middle fifth digit is 0 (Zero), reserved for the bank’s future use. The code is assigned by the RBI to all banks that are participants in RTGS and NEFT system for transferring funds through EFT system. The net banking user transferring funds through EFT system must provide the unique identifying number for smooth and safe transfer of money. The bank prints these unique numbers on the Cheque leaves, and if they are not printed, the net banking user can contact the customer care of the bank and obtain IFSC Code. There are online sites also that provide these unique numbers, but it is advisable that the confirmation through bank is necessary for the right code.
The modernizations in the banking industry have also allowed banks to promote their products and services online. The constant control and supervision of the Reserve Bank of India have made the bank transactions safe and secure.