There are numerous ways for a bank to bank transfer depending on the time and amount of the money transfer. Whether you go to the bank branch or go for mobile/internet banking, you can do it through multiple modes. Among various online modes to transfer money, UPI is undoubtedly the most preferred one. However, if you prefer the old school methods, IMPS and NEFT are quite convenient.
Let’s discuss these methods in detail!
What is NEFT?
NEFT stands for National Electronic Fund Transfer and was introduced by the Reserve Bank of India (RBI). It is a mode of online fund transfer between banks. You can make NEFT payments between two different branches as well as different banks across the country. However, you must request your bank to enable the NEFT facility on your account so that you can transfer the funds to another party. There are a few other important things to note about an NEFT transfer-
- RBI approved the NEFT service for 24×7 and 365 days in 2019, which was earlier limited to only the working hours of the bank
- NEFT transactions do not levy any additional charges on inward transactions, meaning when you receive the money from a sender via NEFT, you don’t have to pay any additional charges. However, when there is an outward transfer which means when you send the money to a recipient, you will have to pay an additional fee depending upon the amount to be transferred. This fee ranges between Rs. 2.5 to Rs. 25 varying for amounts from Rs. 10,000 to Rs. 2 Lakh as set by the banks.
- Also, NEFT transactions of up to Rs. 10,000 invite an additional fee of Rs. 2 plus GST charges
- NEFT is a secured payment gateway which saves your time and effort, which is otherwise involved in making cheques or demand draft payments
- The NEFT transaction amount gets credited within the bank working hours
- NEFT works on a Deferred Net Settlement basis where money is added in batches of half-hour
How does NEFT work?
When you opt for the NEFT mode of payment, you raise a request with the originating bank (that of the sender), which creates a message. The bank sends this message to a pooling center, known as NEFT Service Center. This message is now forwarded to NEFT Clearing Center, operated by the National Clearing Cell of the Reserve Bank of India (RBI). Thereafter, the cell sorts the destination banks for money transfers, and accounting is done to obtain funds from remitter banks. The remitter banks are those from where the debit occurs and the destination ones are for the credit to the beneficiaries’ accounts.
A remittance message from the sender bank is sent through their respective NEFT Service Centers. The Clearing Center also sends inward remittance messages to the destination banks to carry the credit forward.
What is IMPS?
IMPS, an acronym for Immediate Payments Service, is another type of online money transfer mode. A type of Electronic Fund Transfer (EFT), it is also a nationwide payment system that the NPCI (National Payments Corporation of India) maintains. Like NEFT, it is also available on all days and at all hours of the day. Here are some features of IMPS:
- IMPS is a quite safe and secure mode of payment and allows instant payments
- IMPS is a hassle-free and no-fuss payment system as it does not require any bank details of the beneficiary. You only need to have a Mobile Money Identifier (MMID), which is a 7-digit number allotted by banks for performing IMPS transactions
- One can perform an IMPS money transfer if you know the MMID or the mobile number of the recipient and also receive money in the same manner
- You must activate the facility of internet/mobile banking for IMPS. Your number should also be linked with the bank as well as of the recipient as only then, you can have MMID for IMPS transfer
- Just like NEFT, inward remittances are free but not outward ones. Different banks charge differently depending on the amount of transaction, along with the GST
- IMPS transactions have an upper limit of Rs. 2 Lakh per day for account-based transactions
- IMPS is real-time, instant, and is currently, the fastest mode of payments after UPI
How do IMPS work?
The way in which IMPS transactions work depends on whether you perform an IMPS P2P (Person to Person) transfer or P2A (Person to Account) transfer. You only need MMID for immediate transfer through P2P transfer where the remitter bank will debit and send it to the beneficiary’s account. You will need account details such as the account number, IFSC, etc. of the receiver for P2A transactions. IMPS MMID or P2P transfer is mobile-based, whereas P2A transfer is account-based. As mentioned above, the daily transaction limits for both differ.
Difference between IMPS and NEFT Fund Transfer
As you can derive from the explanations above, one major difference between the IMPS and NEFT Fund Transfer is that IMPS is an instant mode of money transfer, unlike NEFT. Listed below are further differences between the two-
- IMPS is mainly regulated by the NPCI whereas NEFT is regulated by RBI
- While IMPS is quick and instant, NEFT is a little time-taking as it is dependent on bank working hours
- IMPS is a direct transfer and is a one-to-one settlement method, whereas NEFT goes through pooling and clearance centers and settles money in the beneficiary’s account batch-wise
- You can make an IMPS payment by logging into internet banking service, mobile banking, through UPI or via ATM. On the other hand, you can do NEFT only through internet banking, provided it is enabled
- For IMPS, you can make mobile-based/P2P payments through MMID but not for the NEFT. You need to add all the bank details like the recipient’s name, account number, mobile number, bank’s name, and IFSC code for NEFT. You will need to add this for the IMPS P2A transfer. Therefore, IMPS provides both options whereas NEFT does not
- Because IMPS is for instant requirements, it has a lesser limit of money transfers. NEFT, on the other hand, has a higher money transfer value. However, both have a minimum transfer value of Re. 1
- IMPS is largely through online modes, while NEFT payments can be made even by going to the bank branch
- IMPS is more versatile and cost-effective than NEFT
- Unlike IMPS, NEFT allows one-way cross border transfer from India to Nepal under Indo-Nepal Remittance Facility Scheme
Comparison Between IMPS and NEFT
Below is a comparative difference between IMPS and NEFT-
|Maximum Money Transfer Limit||Up to Rs. 2 Lakh (Account-based)||Depends on the customer segment|
|Type of Settlement||In batches||One-to-one settlement|
|Time Taken||Can be done instantly or may take some time between 2 hours to 2 days||Can be done only within bank working hours|
|Charges Applicable||Depends on the bank and the amount transferred||Same for all banks but differs according to the amount (Ranges between Rs. 2.5 for up to an amount of Rs. 10,000 to Rs. 25 for an amount up to Rs. 2 Lakh)|
Wrapping it up:
Both NEFT and IMPS are important modes of payment. One can use IMPS for instant transfer but has a limitation. To send money of higher value, you can opt for NEFT. Also, you should compare the charges you pay for each kind of transaction. IMPS is by far the popular traditional mode of payment for small transactions on a day-to-day basis. However, nothing beats the money transfers done by UPI as an online mode of payment. UPI transactions through Paytm do not have any limitations unlike IMPS and NEFT and can be performed at any time and from anywhere.