Electronic Funds Transfer

Do you transfer money to your friends via UPI? Do you swipe your card to withdraw cash from an ATM? Do you pay your mobile bills by entering your card details on online payment gateways? If your answer to any of these is a yes, then you're already familiar with Electronic Funds Transfer (EFT). Today, we look at the various aspects of EFT - the EFT definition, its various types, its benefits and much more. So without further ado, let’s get straight into it. 

EFT Meaning & Full Form

You might be wondering what does EFT stand for after all. Well, the EFT full form is Electronic Funds Transfer. It is a way to electronically transfer money from one bank to another. The payment method was introduced to replace paper-based money exchanges, like cash and cheques. Using EFT, one can pay for their purchases and transfer money to friends and family in just a few steps.

EFT, an umbrella term, includes multiple kinds of transactions, the basis of all being an electronic transfer. EFTs in finance are referred to as direct deposits. The specified amount is directly transferred from the payer's account to the payee's account without any documentation or middlemen. 

EFTs offer a quicker and safer transfer of money. Hence, over the last many years, the EFT system has earned the trust of millions. Let us take a look at the primary uses of EFT.

Uses of EFT in Banking

Salary payments, pension rollouts, online purchases and fund transfers are some of the major EFT benefits. EFT transactions involve: 

  • Depositing money into a different account in the same bank.
  • Transacting between two linked accounts of the same bank.
  • Making payments to an account in a different bank.

How Electronic Funds Transfer (EFT) Works

EFT usage is very simple. An EFT transaction involves two parties—a sender and a receiver. When the sender initiates an EFT transfer, the request is sent to the receiver’s bank via digital networks and payment terminals. To put it simply, EFT exchange takes place via electronic signals.

All that one has to do is enter basic information demanded by the network or terminal. This includes account details, IFSC Code, PIN number, transfer amount and other basic information. No form filling or documentation is required for using EFT in transactions. 

Types of Electronic Funds Transfer (EFT)

We might not realise it but EFTs are a part of our everyday lives. Let us take a look at the various EFT types.


NEFT stands for National Electronic Funds Transfer. It is an EFT system established by the Reserve Bank of India (RBI) in 2005. NEFTs are the most popular form of Electronic Funds Transfer in India. Fund transfers through NEFT are done on a deferred settlement basis. This means that the funds are transferred in phases. The maximum limit of transfer varies from bank to bank. Generally, NEFT transactions are settled within 24 hours. 

Charges: NEFT charges vary from ₹2.5 to ₹25 across banks in India.

Timings: NEFT transfers are now available 24x7. These transactions are conducted every 30 minutes in batches.

Required Details:

  1. Amount to be transferred
  2. Recipient’s Name
  3. Recipient’s Account details
  4. Bank and branch details of the recipient
  5. IFSC code of the recipient’s bank branch.


RTGS is short for Real Time Gross Settlement. It offers prompt transfer of large amounts from one bank to another. This EFT system is generally used by businesses and big corporations. ‘Real Time’ implies that the transaction is settled right when it’s initiated. While ‘Gross Settlement’ implies that every transaction is made individually, without being bundled up with other money transfers. 

The sender and receiver, both should be holding RTGS-enabled accounts. The minimum transferable amount is ₹2 lakhs and there is no limit on the maximum amount. 

Charges: RTGS charges vary from bank to bank. Generally, these charges max out at ₹30 for payments of up to ₹5 lakhs.

Timings: Fund transfer using RTGS can be conducted 24x7 except between 11:30 PM to 12:30 AM.


Required Details:

  1. Amount to be transferred
  2. Sender’s account number
  3. Name of the recipient
  4. Account number of the recipient
  5. Recipient bank and branch names
  6. IFSC code of the receiving branch


Immediate Payment Service (IMPS) is an interbank electronic funds transfer facility. Using this EFT process, one can transfer funds from one bank’s account to another bank’s account using mobile and Internet banking. IMPS Transactions have a maximum daily limit of ₹5 lakh. Transactions made using IMPS are instantly settled.

Charges: Transaction charges range between ₹5-15 along with applicable service tax.

Timings: The facility allows users to transfer funds 24x7 every day, including weekends and bank holidays.

Required Details: 

  1. Amount to be transferred
  2. Mobile Money Identifier (MMID) of the receiver
  3. Receiver's account number
  4. The receiver’s mobile number
  5. Bank and branch name of the receiver
  6. IFSC code of the receiver’s bank branch

UPI Payments

UPI refers to the Unified Payments Interface (UPI). Funds are transferred using UPI through mobile applications with the help of a UPI ID. UPI transfers are much easier compared to other types. The only detail a sender needs to enter is the recipient’s mobile number. UPI transactions are secured via a UPI PIN. Although the transaction limit varies from bank to bank, it is generally set to ₹1 lakh per day.

Charges: NIL

Timings: 24x7x365, no timing restrictions. 

Details Required: The receiver’s mobile number is linked to their bank account.

Direct Deposits

This form of EFT transfer is widely used by employers and employees for regular salary transfers. An employee provides their bank details to the employer. The employer then enters these details into their payroll system. The payroll provider then timely makes salary payments by debiting it from the employer's account and crediting it to the employee’s account. With the help of EFT, there is no need to initiate the payment every time the salary is due. 

ATM Transactions 

Electronic kiosks installed by banks are based on EFT systems. When a card is inserted into an ATM’s card reader, it electronically transfers the bank details of the customer to the machine. The customer then authenticates their identity by entering a PIN. With these simple steps, ATM withdrawals quickly provide money using EFT functionality.

Card Payments

Online and offline card transactions work in a fashion similar to ATM transactions. The card electronically transfers the customer’s bank details to the seller’s bank. The amount is instantly transferred after PIN authentication. 

Wire Transfers

Wire Transfers are generally used to electronically transfer large amounts. A down payment, donation or investment can be safely and quickly transferred using a wire transfer. 

For Transactions In India

Funds can be transferred to any bank using EFT functionality in India. Factors like transfer amount, bank fees and timings among others must be considered while making an EFT payment. The banks require IFSC codes to carry out EFT transactions. In India, EFT payments can be made via NEFT, RTGS, IMPS or UPI.

Customers in India can check the EFT services available at their banks. Bank agents assist customers by guiding them through the steps of EFT transfer.

For International Payments

EFT can also be used for international payments. This is especially useful for businesses having customers around the globe. Using EFT functionality, individuals can smoothly transfer money from their account to the seller. While making international payments, individuals must take foreign fees and currency exchange rates into consideration. 

Benefits of EFT System

  • Safe Payments: EFT functionality offers a secure transfer of money. Any possibility of fraud or discrepancy gets minimised due to robust EFT networks. 
  • Instant Transfer: Money is immediately transferred from the sender’s account to the receiver’s account through EFT. Delays, if any, are usually resolved within a few days.  
  • No Human Intervention: The possibility of errors gets minimised in EFT-based transactions as the transfer is entirely controlled by the sender. 
  • Paperless Transaction: Electronic payments offer comfortable alternatives to physical modes of payment like cash and cheques.
  • Helps Business Thrive: Since EFTs facilitate international transactions, they help businesses expand their global reach.
  • No Geographical Limitations: Using EFT technology, one can transfer funds to anyone in the comfort of their homes and cities.

FAQ About Electronic Funds Transfer (EFT)

What does EFT stand for?

EFT full form is Electronic Funds Transfer.

Is EFT available in India?

Yes, EFT functionality is offered by banks in India.

What is the EFT in finance?

In finance, the EFT full form is Electronic Funds Transfer. The EFT process electronically transfers funds from one bank account to another.

Who controls EFT transactions in India?

India’s central bank, the Reserve Bank of India (RBI) regulates EFT transactions in our country.

How does EFT work in India?

EFT network in India works through NEFT, RTGS, IMPS and UPI. Further, the IFSC code of the recipient branch is required while making EFT payments in India.

What are the four types of EFT systems in India?

The 4 types of EFT services in India are NEFT, RTGS, IMPS and UPI.

What about EFT security?

EFT benefits the sender as well as the receiver by offering secure transfers of money from one bank account to another.

What is the limit of EFT in India?

Different EFT types have different limits. One must consult with their bank before making a transaction.

What is the difference between EFT and NEFT?

There is no difference. NEFT is also an EFT type. It was established by the RBI and is widely used in India.

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