NEFT and IMPS Payment Methods – What Are They and How Are They Different?

NEFT and IMPS are two of the most popular electronic payment methods used by people in India. Both these payment systems are available with all top-of-the-line banking organizations like State Bank of India, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, etc. For tech-savvy and forward-thinking individuals in India, these methods have come as a boon. You may naturally ask – ‘what are some of the benefits of these payment methods?’ Good question! Let us find out.

Benefits of NEFT and IMPS Payment Methods

  • Both the methods above are digital methods of transferring funds. Hence, anyone with access to a computer or a laptop, and an Internet connection can send or receive money without manually visiting a bank.
  • Most of the banks have their mobile banking apps available for both Android and iOS devices. These mobile banking apps come with NEFT and IMPS transfer facilities. Anyone with an Internet-connected smartphone can transfer or receive money even when he or she is commuting. So, banking today no longer restricts mobility.
  • Today, no one needs to manually visit a bank, stand in queues, fill up long forms to send or receive money. One can carry out banking transactions right from the comfort of one’s home.
  • Both payment methods are fast. IMPS is faster with instance transfer facility while NEFT allows transfers within a few minutes to few hours.
  • The two methods above are electronic and hence, saves a lot of paper by eliminating paperwork. All documentation takes place digitally. Naturally, they are environment-friendly.

We can write more benefits if we consider each payment system individual. However, this article is not about their benefits so; we will move on to understand what these two payment methods mean, and how they work.

Ready?

NEFT Payments – What & How?

NEFT is an acronym for National Electronic Fund Transfer. A person, a corporate entity or a firm can use this method of transferring money to a beneficiary. With NEFT transfers, payments reach the account of the beneficiary within a few minutes. However, it can also take a few hours to a few days depending on the time of transfer and holidays. NEFT payment system never allows sending a large sum of money to a beneficiary. Every bank has an upper limit set for a single transaction. The upper limit can differ from one bank to another. For instance, SBI has a maximum limit of INR 2 lakhs set for single NEFT transfer. If you want to transfer more, you need to make multiple such transactions.

On the other hand, there is no minimum limit. You can send any amount you wish. For instance, if you want to send just INR 1, you can do so.

NEFT Payment Processing Takes Place in Batches

NEFT transfers take place in batches. Simply put, banks will not process such transactions as and when they come. They have specific times throughout the day when they process those transfers for clearance.

Typically banks start processing NEFT transfers at 9 AM in the morning and stop at 7 PM. Some banks start early. For instance, SBI starts processing at 8 AM.

Typically, banks process NEFT payments once every one hour. So, if the first batch undergoes processing at 9 AM, the next batch has to wait until 10 AM. SBI, on the other hand, has a half-hourly processing cycle. The frequency of processing differs from bank to bank.

The Timing for Processing is Strict

Banks are very strict about there processing time. For example, if you initiate a NEFT transfer at 9:01 AM, the transfer will enter the second queue and has to wait until 10 AM when the bank starts processing the second batch. Similarly, if you initiate a transfer at 7:01 PM, the bank will not process the payment until next morning.

Saturday and Sunday

Banks will process NEFT transfers on Saturday but only from 8/9 AM till 1 PM. As before, processing takes places in batches. No NEFT transfer takes place on Sundays.

National/State Holidays and Bank Holidays

No NEFT transactions take place on holidays. Why? Simple! Bank employees are on leave! More importantly, RBI’s servers do not operate on holidays.

Where is RBI Server Coming From in NEFT? – How NEFT Works?

Yes, you just asked a brilliant question, and we are glad you did! Now, this is where you learn how NEFT works.

See the image below. It explains the chain of events that happen when you initiate a NEFT transfer.

Do you now understand the role of Reserve Bank of India? Yes, NEFT payments are impossible without RBI servers. So, if RBI is not open, NEFT transactions will stop.

IMPS Payments – What & How?

IMPS is also an acronym like NEFT. IMPS stands for Immediate Mobile Payment Service. There are two catch words that you must not ignore. Can you identify those words? Let us help you:

  • Immediate
  • Mobile

In this form of fund transfer option, you can transfer money to anyone through your mobile phone, and the beneficiary or the person receiving the money will get the funds in his or her account immediately.

So, the transfer is almost instantaneous. There is no waiting period, no batch processing – nothing! The problem is, IMPS settlements are irreversible. Irreversible means, once the payment goes through, the bank will have no power to reverse the payment. In case the money reaches a different account (not in the account of the intended person), the bank will fail to recover the money and pay you back. You have to absorb the loss.

IMPS is an interbank money transfer. Simply put, you can transfer money from one bank account to an account in a completely different bank (for clarification, even NEFT is interbank fund transfer facility).

How does the IMPS System work?

IMPS had two versions:

  • Customer-to-Customer payment.
  • Merchant payment.

Customer-to-Customer Payment

In this method, funds can move from one person to another person. Both recipient and send have to register with their respective banks for mobile banking. Once, they register, their banks will provide two things:

  • MMID: Mobile Money Identifier
  • MPIN: Mobile Banking Personal Identification Number

Now, say customer A wants to send money to customer B. In such a case, customer A has to provide the following details:

  • Mobile number of customer B
  • MMID of customer B
  • MPIN of customer A
  • Remittance amount that will go to customer B

The question is, where to enter these details? There are two options:

  • Through mobile banking application of the bank (for example, SBI Buddy or iMobile, etc.).
  • Through SMS (if the bank supports mobile banking through SMS).

The sender or the remitter (financial jargon) must have:

  • A mobile phone with mobile banking app or SMS facility.
  • MMID of the receiver or beneficiary (financial jargon).
  • Mobile number of the beneficiary.

Once the sender fills in the requisite information and hits the send button, he or she will receive an SMS confirmation about the payment. The recipient or the beneficiary on the, on the other hand, will also receive an SMS that he or she has received money.

Things to remember
  • MMID always links to a unique mobile number. One MMID cannot link with two mobile numbers.
  • More than one MMID can link with a single mobile number. For instance, one person can have two accounts in two different banks, but he may use the same mobile number. If that person activates mobile banking for both banks, two MMIDs will link with a single mobile number.
What if?

What if the beneficiary has not registered for mobile banking? Will IMPS work?

Yes, it will. In this case, the sender will need to use his or her mobile banking app (or SMS banking) and enter the name of the beneficiary, beneficiary account number, IFSC, and remittance amount, and hit the send button. Even in this case money moves instantly from sender account to beneficiary account.

Merchant Payment

This system was there once, but it failed to get enough traction. NCPI or National Payments Corporation of India scrapped this option since May 1, 2017. You can find the circular notice here. Since it is no longer in use, we will skip the details.

Differences Between NEFT and IMPS

Are you wondering how NEFT differs from IMPS? The answer to your question is in the table below:

Point of DifferenceNEFTIMPS
Instant TransferNo – Transfers can take a few minutes to a few hours or a few days.Instant transfer. No waiting period at all.
ServerReserve Bank of India’s server.ATM servers of banks.
24×7No – Transfers are allowed between specified time frames on working days. Usually between 9 AM and 7 PM. For Saturday, the time frame is between 9 AM and 1 PM24×7 transfer facility available because of ATM servers.
365 DaysNo – Transfers can take place only on working days. No transfer takes place on Bank Holidays, State or National Holidays and Sundays.Transfers take place 365 days a year.
Batch ProcessingYes – Transfers are processed in batches.No – Transfers take place on an individual basis. In other words, ever transfer takes place as soon as the transfer request comes.
PlatformNet Banking Platform, Mobile Banking Platform, directly from the bank (manual submission of NEFT transfer form).Mobile Banking App, SMS, Net Banking Platform, ATM, Branch, and USSD (using code *99#).

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