Difference between NEFT and EFT
Key Difference: ‘NEFT’ stands for National Electronic Fund Transfer. ‘NEFT’ in India, is associated to an electronic fund transfer system, in which transactions are settled electronically between the banks and the facility is available nation-wide. 'EFT' stands for Electronic Fund Transfer. This term can mean a lot of things. EFT as RBI-EFT in India, stands for a system that was introduced by Reserve Bank of India and provides the same facility as NEFT but is limited to few centres in India. Unlike RBI-EFT, RBI-NEFT is based on centralized concept. EFT may also be used as an umbrella term that covers all the systems in which funds are transferred from one bank account to the other bank account without any transfer of actual paper money.
We often need to transfer the funds from one account to the other. The advent of new technologies had made the task very easy. Looking back, one can easily remember a long queue of people in bank for various purposes. NEFT and EFT refers to such important services that are provided by the advancing banking sector. It is very difficult to bring out the differences between these two terms as EFT can be used in many context. However, NEFT is generally associated with the nation wide service for electron fund transfer.
If we consider EFT as an umbrella term for all the methods of electronic fund transfer, then NEFT will fall in the category of EFT. If we consider the difference from viewpoint of India, then both are mainly related to two different payment methods by Reserve Bank of India. In this article, we will focus on the meaning from viewpoint of RBI payment methods in India. However, it is important to mention that NEFT may refer to any nation's electronic fund transfer scheme that has its reach throughout the nation.
‘NEFT’ stands for National Electronic Fund Transfer. NEFT enables the individuals or institutions to electronically transfer the funds from any bank branch to any individual or institutions that may have an account in any other bank branch in the country participating in the Scheme.
This system was launched in November 2005 in India. In India, Reserve Bank of India ordered all banks of India to migrate to NEFT by mid December 2005. A bank branch must be NEFT-enabled to use the NEFT funds transfer network. Individuals or institutions which maintain accounts with a bank branch are eligible for using NEFT. Even such individuals who do not have a bank account can also deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT.
EFT as electronic fund transfer can refer to a number of things. It is used as an umbrella term for all the electronic services through which the funds can be transferred without actually transferring the real paper money. This includes a lot of services like paying of bills online, online shopping, mobile banking and many more. However, as NEFT mainly refers to national electronic fund transfer facility provided by Reserve Bank of India. The direct comparison of NEFT could be made with EFT facility that is also provided by the Reserve Bank of India and is known by RBI-EFT.
The main difference between them is that RBI-EFT is confined to 15 centres in India, whereas NEFT is centralized. Thus, NEFT system can be regarded as an improvement over the existing EFT systems of RBI. However, both these systems work on Net settlement methods.
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