NEFT vs IMPS – Comparison, Advantages and Working

What is NEFT?

National Electronic Fund Transfer or NEFT is a digital payment method introduced by the Reserve Bank of India. You can transfer funds between two different NEFT-enabled accounts using this method 24×7, across the year. The transfer time could take up to a few hours as the transfers are done in 30-minute batches. 

How Does NEFT Work?

• User has to raise a request with the respective bank for fund transfer through NEFT
• Bank forwards the request to NEFT Service Centre, also known as the pooling centre
• The pooling centre passes over the message to NEFT Clearing Centre, which operates under National Clearing Cell of Reserve Bank of India
• Cell decides the destination bank for fund transfer and collects the fund from the remitter bank
• Clearing Centre and NEFT Service Centre forward the message to the destination bank for passage of credit.

Advantages of NEFT

• Fast money transfers: NEFT transfers are near-instant as they are usually completed in less than an hour.
• Secure: NEFT transactions are secured by the RBI and they also come with legal backing.
• No upper limit: There’s no upper limit to transferring funds through NEFT.
• Low cost: The outbound transactional charges of NEFT are capped by the RBI.
• Always available: NEFT transactions could be made 24×7 across the year, including on bank holidays.

What is IMPS?

IMPS stands for Immediate Payment Services. It allows both inter and intra-bank services up and is available 24X7 across the year up to ₹5 lakh. This instant fund transfer service can be availed through internet banking, mobile banking, SMS and even via an ATM. To transfer money online, you should have both a mobile number and MMID or IFSC code and account number. 

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How Does IMPS Work?

There are four participants involved in the fund transfer process through IMPS:

1. Remitter 
2. Beneficiary 
3. Bank
4. National Financial Switch – NFS is the largest interconnected network of automated teller machines (ATM)

Remitter needs to meet the following requirements:

• Register with the mobile banking service of the respective bank
• Obtain MPIN and MMID (Mobile Money Identifier)
• Use the mobile application or the SMS service if your bank provides the same

A beneficiary needs to do the following to receive the fund from the remitter:

• Link mobile number with the bank account
• Collect MMID from the bank

Online fund transfer can happen in either of the two ways:

• Through account number and IFSC 

Not in all the cases, both the beneficiary and the remitter will have their mobile number registered with their respective banks. In such scenarios, fund transfer can be made possible using the account number and IFSC code as well. 

• Through mobile number and MMID

To avail of services through mobile banking or SMS, both remitter and beneficiary should activate the mobile banking facility and obtain MMID, which is a one-time procedure.

How is IMPS Used?

• Step 1: Login to your internet or mobile banking account
• Step 2: Click on ‘Fund Transfer’ or ‘Money Transfer’
• Step 3: Choose ‘IMPS’
• Step 4: Enter the beneficiary’s MMID and your MPIN
• Step 5: Enter transfer amount
• Step 6: Click on ‘Confirm’
• Step 7: Enter OTP received on your registered mobile number to validate the transfer

Advantages of IMPS

• Fast: IMPS allows users to transfer funds instantaneously between two eligible bank accounts
• Secure: IMPS transactions are operated by the National Payments Corporation of India (NPCI) promoted by the RBI. Hence, the transfers are fully safe and secure
• Low cost: IMPS is a cost-effective way to electronically transfer funds as the maximum outbound transaction fee is only ₹15 plus taxes for an amount bigger than ₹1 lakh. 
• Always available: IMPS transfers can be done 24×7 on 365 days via net banking and mobile banking
• High maximum transaction limit: You can transfer up to ₹5 lakh through an IMPS transfer. This is much higher than daily UPI transfer limits of ₹1 lakh or ₹50,000 or lesser, depending on your bank

Difference Between IMPS and NEFT 

IMPS vs NEFT – Which is Better?

Both IMPS and NEFT are quick and easy money transfer methods backed by NPCI and RBI, respectively. 

If you’re looking to transfer money immediately, IMPS could be faster than NEFT as the latter might take a few hours to complete the transaction.

However, IMPS transactions have an upper limit of ₹5 lakh – if you want to transfer a bigger amount, you should consider NEFT or even RTGS. In fact, RTGS could be a faster method to transfer funds above ₹2 lakh than NEFT as it’s done on a transaction-to-transaction basis, unlike the latter’s batch system.

That said, while IMPS offers both P2A (using beneficiary’s account number and IFSC) and P2P services (using beneficiary’s MMID and phone number), NEFT only offers P2A. However, IMPS can only be done online while users can also visit a bank branch to make an offline NEFT transfer.

Things to Consider Before Making NEFT and IMPS Transfer

• Transfer time: IMPS transfers are instantaneous while NEFT transfers could take a few hours to complete.
• Transfer amount: IMPS transactions are limited to ₹5 lakh subject to internal third party limits, while there’s no such upper limit for NEFT transactions.
• Outward transfer charges: Both IMPS and NEFT outward transfers could cost you a nominal fee plus applicable GST. However, neither charges anything for inward transfers.
• Network compatibility: Users should check whether the account number of the beneficiary is a part of the respective IMPS or NEFT network before making a payment.

Final Word

The IMPS vs NEFT question is not very tough, provided you’re aware of the pros and cons of each to find out which one meets your specific requirements. For example, for transactions up to ₹5 lakh, IMPS is likely to be quicker than NEFT. However, for bigger transactions, you’ll have to choose between NEFT and RTGS. We hope our detailed IMPS vs NEFT comparison will help you make the right choice.

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