Types of Electronic Funds Transfer in India

 

The boom in online mode of financial transactions and the related digital economy has come as a massive template of transparency and accountability for the average Indian consumers. After the move of demonetization, carried out by the incumbent administration, there was a large dip in offline or purely cash-based transactions. While on one hand, this resulted in a gradual depletion in the number of transactions that were earlier carried out in the shape of hard cash, this has also led to an increase in the online transactions and fund transfers in India. Owing to the increased transparency, minimal chances of errors and ease of processing, electronic fund transfers are becoming popular by each passing day.

Here are a Few Electronic Methods Available for Transferring Funds Between Two Accounts: 

In the aftermath of demonetisation, people are more likely to use different types of electronic funds transfer mechanisms to make monetary transactions. Mobile and laptop devices make it convenient to conduct online fund transfers via mobile devices, enabling users to conduct transactions from the comfort of their homes or workplaces. By utilising IFSC Codes, these methods overcome geographical limitations, ensuring seamless money transfers.

For example, when transferring funds to an HDFC Bank account at the Vasant Vihar Branch in New Delhi, specifying the HDFC Bank IFSC Code of that branch is crucial.

However, choosing the best money transfer method can be difficult. To make an informed decision, it is important to consider factors such as transfer limits, time, and costs. Here are some methods for transferring money electronically between accounts:

1. Transactions conducted within the same bank between your own linked accounts.

2. Account transactions within the same bank involving different accounts.

3. Transferring money to other bank accounts through NEFT.

4. Transferring money between accounts in different banks through RTGS.

5. Transfers of money to diverse accounts using IMPS.

Following are the Types of Electronic Funds Transfer in India

• Electronic fund transfer through IMPS: 

IMPS or the Immediate Payment Service is the type of electronic fund transfer that comes in handy when money has to be transferred immediately to the beneficiary account. IMPS facility can be availed even on bank holidays or weekends when the offline banking operations are closed. The transfer can be done through ATMs, mobile phones or using standard net-banking. This facility is open around the clock and gives customers access to electronic fund transfer at all times. The details that are needed are- Name and account details of the beneficiary, MMID (Mobile Money Identifier) number of the beneficiary, IFSC code of the beneficiary, the amount etc.

• Electronic fund transfer through RTGS: 

RTGS or Real Time Gross Settlement is the mode of electronic fund transfer wherein a minimum of Rs. 2 Lac can be sent to a beneficiary's account. The branches through which RTGS is to be done (i.e. both the sender as well as the receiver's branches) must have the facility of RTGS enabled to be able to carry out the transactions. There is a particular duration for RTGS and the transferred amount takes about 30 minutes to be deposited in the beneficiary's account. The details that are needed for RTGS are - name and account details of the sender, name of the beneficiary, account details of the beneficiary, IFSC code, amount to be transferred etc.

• Electronic fund transfer through NEFT: 

NEFT or National Electronic Fund Transfer is the most commonly used electronic fund transfer medium in India. Depending on the amount to be transferred, banks may charge Rs 2.50 to Rs 25 for the transaction. NEFT facility can be availed of only during the working hours of the banks and remains closed during bank holidays or weekends when the banks are not functional. There is no upper capping on the amount that can be transferred and the details required are- beneficiary's name and account details, IFSC code of the beneficiary's bank branch etc.   

• Electronic fund transfer through UPI: 

By using UPI-enabled applications, you can effortlessly conduct transactions (up to Rs 1 lakh) with any smartphone. This simplifies the money transfer process, resulting in a quicker transaction. It's important to note that users are not required to provide credit card numbers or bank account information. Moreover, funds can be transferred in real-time at any time.

The UPI platform does not charge any fees for person-to-person money transfers. Prior to this change, a fee of Rs 15 was charged to merchants when transferring money. The charge was removed after demonetisation.  

• Direct Deposit: 

Transferring funds electronically can be used for a wide variety of purposes. Business owners and employers alike benefit from direct deposit when it comes to settling invoices and paying employees. Besides sending money to friends and family, individuals can also use electronic bank transfers to transfer funds between their own accounts. It's important to keep in mind, however, that the process does not happen instantly and typically takes 2-3 business days.

• Credit and Debit Cards Transactions:

Payments made with a credit or debit card are types of electronic funds transfer (EFTs). The EFT types payment method is used whether you're buying items in a physical store, online, or by phone. Despite the fact that funds may take a few days to clear, the EFT payment system automatically verifies the availability of funds, essentially validating the transaction immediately.

• ATM Transactions:

Although cash is received in a tangible form from an ATM, it also constitutes a type of electronic funds transfer. Your ATM communicates with your bank in order to ensure there are funds available before dispensing the cash.

• Online Payment Systems:

Online purchases can be made with credit and debit cards, but there are other options as well. A secure online payment system facilitates both online purchases and invoice settlement through a protected connection, facilitating the settlement of invoices digitally as well. Among these systems is Square Online Payments, which enables businesses to receive payments quickly.

• Wire Transfers: 

While wire transfers involve the sending of cash, they remain fundamentally electronic because the sender provides the funds at a bank or wire transfer facility. Transferring funds electronically ensures that the recipient, who may be located anywhere in the world, receives the funds as soon as they are available.

• ACH Direct Payments:

The Automated Clearing House (ACH) network allows for electronic fund transfers between financial institutions using ACH Direct Payments. A variety of transactions can be incorporated into these payments, such as bill payments, purchases, and fund transfers.

All ACH transfers, except for direct deposits, are considered to be Electronic Funds Transfers (EFTs). The ACH network is adaptable and widely used in electronic financial transactions, as evidenced by the comprehensive categorisation of ACH direct payments.

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FAQs on Types of Electronic Funds Transfer in India

Q: What are the different types of electronic fund transfers?

EFTs, NEFTs, RTGSs, and IMPSs are different types of electronic funds transfers.

Q: Do businesses have to offer EFT payments?

For convenience, businesses often accept EFT payments but are not obligated to do so.

Q: Is UPI an electronic fund transfer?

Yes, UPI is an electronic fund transfer.

Q: What are the advantages of electronic fund transfer?

Among the advantages of electronic fund transfer are its speed, convenience, security, and accessibility.

Q. What are the 4 most common types of electronic fund transfer?

There are four common types of transfers: internal transfers, NEFT, RTGS, and IMPS.

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