Private sector banks, followed by public sector banks (PSBs), are the biggest players in the electronic fund transfer system National Electronic Funds Transfer (NEFT) network, both in volume and value terms, an article published by the Reserve Bank of India’s (RBI’s) economic and policy research department said.
“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 banking regulator, however, said the views expressed do not represent the regulators’s.
“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 net receivers in the system," it 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 the 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 RBI operates in terms of transaction value and is commonly used by businesses to transfer funds.
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 system. The facility of electronic transfer of funds is available from 8am to 7pm 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, RBI last month said beginning December, online payment facility through NEFT will be available round-the-clock. As of now, the transfer of funds via NEFT can only be during banks’ working hours. In July, RBI had scrapped the levy on online transactions such as NEFT and RTGS.
During 2018-19, 2.3 billion NEFT transactions worth ₹227.93 trillion were recorded, according to RBI data. In July, there were as many as 219.4 million transactions worth ₹17.8 trillion.