Page 100 - DMGT303_BANKING_AND_INSURANCE

Unit 5: Payment and Settlement System

their own limitations. In order to facilitate speedy intercity money transfer of funds and Notes
ensure effective customer service, the Reserve Bank of India introduced an Electronic
Funds transfer mechanism.
Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make payment
to another person/company etc. can approach his bank and make cash payment or give
instructions/authorization to transfer funds directly from his own account to the bank
account of the receiver/beneficiary. Complete details such as the receiver’s name, bank
account number, account type (savings or current account), bank name, city, branch name
etc. should be furnished to the bank at the time of requesting for such transfers so that the
amount reaches the beneficiaries’ account correctly and faster. The RBI is the service
provider for EFT.
Scope of Transfer of Funds under EFT
As of now, EFT facility is available for transfer of funds between bank branches in about
15 major cities and towns across the country. Under another special scheme called Special
EFT, many more select branches (which are on the computer network of the banks) in over
200 cities have been brought‘ into the fold of funds transfer electronically. The RBI displays
in its website the details of the banks and the cities where EFT facility is available.

Time Duration of Funds Transfer under EFT
Funds transfer normally takes place on the same day or at the most the next working day
depending upon the time of requesting/effecting such funds transfers. The customer should
confirm this aspect from his bank at the time of requesting the funds transfer.
Benefits of EFT

EFT is a faster mode of transfer of funds which facilitate transference of funds within
24 hours.

The system is customer-savvy as no paperwork is involved and delay is witnessed.
There is absolutely no requirement for the beneficiary to go to the bank since the
beneficiary’s account is credited automatically.

In-built security systems ensure safer mode of transference of funds.
Electronic Funds Transfer-Charges

The banks generally charge some processing charges for EFT just as in the case of other
services like demand drafts, pay orders, etc. The actual charges depend upon the amount
and the banker-customer relationship. However, for the present, the RBI has waived all its
charges on EFT that were being recovered from the banks for processing such funds
transfer transactions at the clearing houses run by RBI. This has certainly reduced the
processing cost for the banks also.

2. Electronic Clearing Service (ECS): Electronic Clearing Service (ECS) is a retail payment
system that can be used to make bulk payments/receipts of a similar nature especially
where each individual payment is of a repetitive nature and of relatively smaller amount.
This facility is meant for companies and government departments to make/receive large
volumes of payments rather than for funds transfers by individuals. The ECS facility is
available in 47 centres across India operated by RBI at places where it manages the clearing
houses and by SBI and its associates in other centres. The ECS is further divided into two
types - ECS (Credit) to make bulk payments to individuals/vendors and ECS (Debit) to
receive bulk utility payments from individuals.

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