Difference Between NEFT and IMPS

Introduction

Depending on the timing and size of the transfer, there are many options for the bank to bank transfers. There are various ways to conduct banking transactions, including in-branch visits and online and mobile banking. IMPS and NEFT are quite practical if you like the traditional approaches.

What is NEFT?

NEFT stood 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 branches and different banks nationwide. 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 additional charges on inward transactions, meaning when you receive 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 that 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's 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 choose the NEFT payment method, you submit a request to the sender's bank, which creates a message. The cell performs accounting to gather funds from the sending banks and sorts the recipient banks for money transfers afterward. Remitter and destination banks are the two types of banks that start debits and credits to receivers' accounts.

A remittance message from the sender bank is sent through their respective NEFT Service Centers. The Clearing Center 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 all day and at all hours. 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 beneficiary bank details. 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 one knows 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 and recipient, as only then can you have MMID for IMPS transfer.
• Just like NEFT, inward remittances are free, but not outward ones. Different banks charge differently depending on the transaction amount and the GST.
• IMPS transactions have an upper limit of Rs. 2 Lakh per day for account-based transactions
• IMPS is real-time and instant and is currently the fastest mode of payment after UPI.

How does IMPS Work?

Whether you do an IMPS P2P (Person to Person) transfer or a P2A (Person to Account) transfer determines how IMPS transactions operate. You require MMID for quick transfer through P2P transfer, where the remitter bank will debit and send it to the beneficiary's account. For P2A transactions, you will require the receiver's account information, including their account number, IFSC, etc. P2A transfer is account-based, whereas IMPS MMID or P2P transfer is mobile-based. As indicated previously, the daily transaction limits for both differ.

Difference between NEFT Money Transfer and IMPS

The fact that IMPS is an instant way of money transfer, as opposed to NEFT, is one of the key distinctions between the IMPS and NEFT Money Transfer, as you can infer from the explanations above. The following are further distinctions between the two:

• The RBI regulates NEFT, whereas the NPCI primarily regulates IMPS.
• IMPS is a direct transfer and a one-to-one settlement mechanism, whereas NEFT passes through pooling and clearance centers and pays money in the beneficiary's account batch-wise.
• NEFT is a little time-consuming because it is reliant on bank working hours.
• You can use UPI, ATMs, mobile banking, internet banking, or mobile banking to make an IMPS payment. However, if enabled, NEFT can only be performed through online banking.
• MMID allows you to make mobile-based/P2P payments for IMPS but not NEFT. For NEFT, you must include the necessary bank information, including the recipient's name, account number, mobile phone number, bank name, and IFSC code. For the IMPS P2A transfer, you must add this. NEFT does not offer both choices, although IMPS does.
• IMPS has a lower maximum amount for money transfers because it is intended for instant needs. The money transfer value is higher with NEFT, on the other hand. But each has a minimum transfer value of Rs 1.
• While NEFT payments can also be performed in person at a bank branch, IMPS payments are primarily conducted online.
• IMPS is more versatile and cost-effective than NEFT.
• NEFT prohibits one-way cross-border transfers from India to Nepal via the Indo-Nepal Remittance Facility Scheme.

Advantages of NEFT

• Continuous Availability: NEFT is accessible every day of the week, all day long. Money can be sent quickly, even on weekends and holidays. Anyone who needs money for an emergency will find this function quite convenient.
• Transferring Money at A Low Cost: Many banks provide the NEFT service for free. Banks that do impose fees do so at minimal costs. This makes NEFT one of the most economical methods for sending money.

What Drawbacks are there to NEFT?

NEFT transfers are frequently carried out in groups. Hence, when you start an NEFT funds transfer, the money does not immediately reach the beneficiary. Because of this, NEFT is an inappropriate option if you want to send the receiver money immediately away. Even if the move happens in a matter of hours, it may be inconvenient if anything urgent happens. Instead, RTGS, or Real Time Gross Settlement, may be helpful in this situation.

Benefits of IMPS

• IMPS services offer a simple, risk-free way to send money.
• It is a seven-day, twenty-four-hour service. The IMPS service is still available even on bank holidays.
• The MMID, Aadhar Number, and mobile phones can be used to access the financial service.
• This service is reasonably priced.
• IMPS services are accessible through mobile banking, SMS, USSD, and ATMs.
• The financial transactions can be completed in a matter of seconds.
• IMPS services only provide mobile SMS service for credit and debit card confirmations.
• IMPS services enable transactions worth more than Rs. 2 lahks.
• Using IMPS transactions, NRIs can transfer funds from their NRI bank accounts to their Indian bank accounts.
• The IMPS Services allow for merchant payments to be made at any time of the day.
• While certain banks, like City Bank, etc., do not charge any money for the transactions, some banks, like those mentioned above, charge 5 rupees for IMPS services.

The IMPS's drawbacks

• Transaction thresholds could differ from bank to bank.
• It's crucial to exercise caution and remove all the information associated with your mobile applications while switching mobile handsets; otherwise, you risk being a victim of online fraud and losing your hard-earned money.
• These services come with a hefty service fee.

Conclusion

In conclusion, IMPS can be utilized for instant transfers despite constraints. For sending bigger sums of money, use NEFT. Compare the fees you pay for various kinds of transactions as well. When it comes to little daily transactions, IMPS is by far the most widely used traditional payment method.