New Delhi: Private sector banks, followed by public sector banks (PSBs) are the biggest players in the National Electronic Funds Transfer (NEFT) network, both in terms of volume and value, according to an article published by the Reserve Bank of India’s (RBI’s) economic and policy research department.
“Our findings show that out of the public sector, private sector and foreign banks that constitute around 83% and 87% of the total transactions by value on NEFT in the month of March and April (2019), respectively, the flow from private sector to public sector banks is very large, with public sector banks being net receivers in the system," the article titled ‘Network Analysis of NEFT transactions in India’ said.
The RBI has said the views expressed in the article do not represent the regulator’s view.
“Payment flows are particularly strong within the public-to-public sector and private-to-private sector banks network. The flow from private-to-public sector banks is also very large with public sector banks being the net receivers in the system," the article said.
While the study analyses NEFT transactions in April and May, a study of all 12 months of such transactions will give holistic idea of seasonal patterns, it said. Such network analysis can be of use for tracking interconnectedness of banks and payments system on a real-time basis. “The analysis of payment systems is complementary to the existing network analysis of interbank exposures. Such analysis will be useful in shedding light on the evolution of payment networks in India and pinpointing risks, if any, from concentration of payment flowstem," the report said.
NEFT is the largest payment system operated by the RBI in terms of transaction value and is commonly used by businesses to transfer funds. Online transfer of funds reduces businesses’ dependency on cheques and saves time.
Over 210 entities, including all scheduled commercial banks--PSBs, private and foreign banks, cooperative banks, regional rural banks (RRBs), payment banks, and small finance banks--participate in the NEFT ecosystem. The facility of electronic transfer of funds is available from 8 am to 7 pm on all working days, except the second and fourth Saturday of the month. While there is no minimum cap on fund transfer through NEFT, the upper limit for transfer is ₹2-5 lakh, depending on the bank.
In line with the government’s push for greater adoption of digital payments, the banking regulator last month said online payment facility via NEFT will be available round-the-clock beginning December. As of now, transfer of funds via NEFT can only be done during banks’ working hours. In July, the RBI scrapped the levy on online transactions, such as NEFT and RTGS, to make fund transfers cheaper.
During 2018-19, 2.3 billion NEFT transactions worth ₹227.93 lakh crore were recorded, according to RBI data. In July, there were as many as 219.4 million transactions worth ₹17.8 lakh crore.
