Guide to EFT Meaning, Electronic Transfer Types & Rules

Electronic Funds Transfer (EFT) refers to the digital transfer of money from one bank account to another without the need for paper-based documentation. This method leverages electronic networks to process payments, making it a cornerstone of modern banking.

EFT is widely used for various financial transactions, such as paying utility bills, transferring funds for EMIs, or settling loan payments. It eliminates the need for cheques or cash, offering a faster and more convenient alternative.

Why EFT matters in modern banking

1. Convenience: EFT allows you to transfer funds anytime, anywhere, without visiting a bank branch.
2. Speed: Transactions are processed quickly, ensuring timely payments.
3. Cost-Effectiveness: Many EFT methods, such as UPI, are free or come with minimal charges compared to traditional methods.

For example, if you need to pay your monthly electricity bill or transfer funds to a friend, you can do so instantly using an EFT method like UPI or IMPS. This ease of use has made EFT an integral part of our daily financial lives.

India offers a wide range of EFT systems, each designed to cater to different transaction needs. Here is a breakdown of the most common types:

1. Unified Payments Interface (UPI)

UPI is one of the most popular EFT methods in India, allowing instant fund transfers between bank accounts via mobile apps. It is fast, secure, and enables payments using a Virtual Payment Address (VPA).

• Processing Time: Instant
• Maximum Limit: Rs. 1,00,000 per transaction (subject to bank policies)

2. National Electronic Funds Transfer (NEFT)

NEFT is a widely used system for transferring funds in scheduled batches. It is ideal for non-urgent payments and supports both individual and bulk transactions.

• Processing Time: Hourly batches during banking hours
• Maximum Limit: No upper limit (subject to bank policies)

3. Real-Time Gross Settlement (RTGS)

RTGS is designed for high-value transactions that require real-time processing. It is commonly used by businesses and individuals for urgent fund transfers.

• Processing Time: Real-time
• Minimum Limit: Rs. 2 lakh
• Maximum Limit: No upper limit

4. Immediate Payment Service (IMPS)

IMPS enables instant fund transfers 24/7, including weekends and bank holidays. It is ideal for smaller, time-sensitive transactions.

• Processing Time: Instant
• Maximum Limit: Rs. 2 lakh per transaction (varies by bank)

5. Direct deposits and online bill payments

Direct deposits refer to automated transfers, such as salary credits or government subsidies, directly into a recipient’s bank account. Similarly, online bill payments allow you to pay utility bills, insurance premiums, and other expenses digitally.

RBI guidelines for EFT systems

The Reserve Bank of India (RBI) regulates all EFT systems to ensure secure and efficient transactions. Key guidelines include:

• Mandatory two-factor authentication for online payments.
• Use of encrypted channels to protect sensitive information.
• Monitoring and reporting suspicious transactions to prevent fraud.

While EFT offers numerous benefits, it is essential to be aware of potential risks such as phishing scams, fraudulent websites, and unauthorised access. Here are some tips to ensure the safety of your EFT transactions:

1. Use secure portals and apps

Always use official banking apps or authorised portals to initiate EFT transactions. Avoid clicking on unknown links or sharing sensitive information like OTPs and passwords.

2. Enable two-factor authentication

Two-factor authentication adds an extra layer of security by requiring you to verify your identity through an OTP or biometric scan.

3. Monitor your transactions

Regularly check your transaction history for any unauthorised activity. If you notice any discrepancies, report them to your bank immediately.

4. Understand Risk-Based Authentication (RBA)

RBA is a security feature that evaluates the risk level of your transaction based on factors like location, device, and transaction behaviour. If any unusual activity is detected, additional verification steps may be required to complete the transaction.

Pro-tip:

Set up payment reminders and transaction alerts through your bank’s app to stay updated on your account activity.