Related Topic in KAS Prelims Syllabus:
Economy [Paper-II]: Recent fiscal and monetary policy issues and their impact, structure of Indian Banking and Non- Banking Financial Institutions and reforms
Why in News?
Bank customers will be able to transfer funds through NEFT around the clock on all days including weekends and holidays from December 16, 2019.
News in Detail
- Individuals will be able to transfer money online any time as the Reserve Bank of India (RBI) has allowed 24-hour National Electronic Funds Transfer (NEFT) facility throughout all 365 days in a year.
- This will provide customers with more flexibility to make payments at any time compared to the 8 am-6:30 pm deadline applicable till now.
- NEFT transactions after usual banking hours of banks are expected to be automated transactions initiated using ‘Straight Through Processing (STP)‘ modes by the banks.
- People will also be able to transfer money online to other individuals on holidays, enabling them to make urgent transfers without having to wait for banks to open.
- The existing discipline for crediting beneficiary’s account or returning the transaction (within 2 hours of settlement of the respective batch) to originating bank will continue.
What is NEFT?
- It is a nation-wide payment system facilitating one-to-one funds transfer.
- Started in November 2005, it was established and maintained by Institute for Development and Research in Banking Technology (IDRBT). IDBRT is an institution exclusively focused on banking technology established by the Reserve Bank of India in 1996.
- NEFT enables bank customers in India to transfer funds between any two NEFT-enabled bank accounts on a one-to-one basis. It is done via electronic messages.
- The move is expected to further promote digital transactions in India as bank customers will now be able to transfer amounts higher than IMPS via NEFT on any given day.
- Till now, only IMPS facility was available on all days, but with online money transfer capped at Rs two lakh.
[Source: Economic Times, rbi.org]