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From January, banks cannot charge you for online NEFT transactions

From January 2020, banks can no longer charge savings bank account holders for online transactions in the NEFT system. The Reserve Bank of India (RBI) has now mandated banks to do this through a press release on Friday. In its press release, RBI stated that it is doing this to promote digital payments.

In its July monetary policy review, RBI had decided to do away with charges for NEFT and RTGS transactions. However, it hadn’t set a date by when banks had to comply. In its July statement it had said, “In order to provide an impetus to digital funds movement, it has been decided to do away with the charges levied by the Reserve Bank for transactions processed in the RTGS and NEFT systems. Banks will be required, in turn, to pass these benefits to their customers.”

In the press release issued today titled, Furthering Digital Payments, it said that it will be taking these steps to encourage digital payments further:

  • Operationalise the Acceptance Development Fund to increase acceptance infrastructure with effect from January 1, 2020.
  • Constitute a Committee to assess the need for plurality of QR codes and merits of their co-existence or convergence from both systemic and consumer viewpoints.
  • Permit all authorised payment systems and instruments (non-bank PPIs, cards and UPI) for linking with National Electronic Toll Collection (NETC) FASTags. Going forward, this will facilitate the use of FASTags for parking, fuel, etc., payments in an interoperable environment.
  • Enable processing of e-mandates for transactions through UPI.
RBI's statement, on the three-year anniversary of demonetisation, said that digital payments constituted 96 percent of total non-cash retail payments during the period October 2018 to September 2019. "During the same period, the National Electronic Funds Transfer (NEFT) and Unified Payments Interface (UPI) systems handled 252 crore and 874 crore transactions with year on year growth of 20% and 263%, respectively. This rapid growth in the payment systems, inter-alia, has been facilitated by a series of measures taken by the Reserve Bank of India," stated the release.

What is National Electronic Fund Transfer (NEFT)?
NEFT is a payment system facilitating funds transfers from one bank account to another. One can access this service either by using Internet banking or by visiting the bank branch. (Not all bank branches are enabled with this service.)

Once you initiate the transfer, the money reaches the beneficiary account within hours. There is no limit on the minimum or maximum amount you can transfer, however, individual banks may put restrictions on the per transaction amount.

In July, almost immediately after RBI's saying that banks should remove charges on NEFT, State Bank of India announced waiver of charges on NEFT, RTGS and IMPS.
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