Electronic fund transfer

1. ELECTRONIC FUND TRANSFER
Definition, Types of EFT and Cheque truncation:
By Vaghela Nayan K.
Asst Prof. SDJ International College

2. MEANING AND DEFINITION:
• Electronic funds transfer (EFT) is the electronic transfer of money from one
bank account to another, either within a single financial institution or across
multiple institutions, through computer-based systems and without the direct
intervention of bank staff.
• In the fast growing age of E-Business, there is a requirement of reliable and
secure payment system for the goods and services purchase on the net.
• Now we have the mode of EFT to ensure on the go payments and almost all
the banks are providing this facility to their valuable customers.

3. TYPES OF ELECTRONIC FUND
TRANSFER SYSTEM
• Transfer of money between banks like RTGS (real time gross
settlement).
• Transactions between computers of different organizations and
bank computers.
• Transactions trough Automatic Teller Machine.

4. WORKING OF ELECTRONIC FUND TRANSFER
• The EFT enables transfer of funds within the city or cities and between
branches of a bank and across banks.
• The maximum limit for a single transaction under EFT has been enhanced to
Rs. 2 Crore.
• The amount of EFT is being credited to the beneficiary’s account on the
same day and it is paperless money transaction system.
• All the money transfer transactions are controlled by the Branches of RBI,
here the one branch of RBI will transfer the fund to another branch by Code
Signals and then it will be credited to the beneficiary’s account.
• This is reliable, quick and economical means of fund transfer.

5. TOOLS FOR ELECTRONIC FUND TRANSFER
1. Automated Teller Machine (ATM):
• For simple credit and debit transactions, the ATM can be used.
• Almost all banks have installed the ATM machines within the branch premises or
at distant places.
• This ATM machines facilitates the depositors in availing their part of deposits 24x7,
and all the day of a year.
• To avail this facility, the bank customers must have an ATM card which is a
plastic card containing the Name of the card holder and the card number.
• The password is also required which is given to the customer at the time of issuing
the card.
• At the time of withdrawal, customer needs to insert the card at the proper
place, and have to push the relevant buttons indicating the password and the
amount of withdrawal.

6. • The machine will read the card, records the payment and tenders
necessary currency notes, and issues a slip to the card holder
indicating the transaction and the closing balance in the account.
• The ATMs are connected to the computers at the branch
concerned, which records the transaction immediately.
• Each bank may also prescribe the ceiling limits under an ATM
transaction per day.
• This reduces the cost of remittance facility and also provides
convenience to the bank customers.
• Many banks are sharing the AMT with some other banks, therefore
the customers can avail their money from any ATM irrespective of
his bank.

7. 2. Electronic Cheque:
• The Negotiable Instruments (Amendments and Misc. Provision) Act
2002 which was enforced with effect from 6th Feb 2003, has
introduced the concepts of “Electronic Cheque” and “Cheque
Transactions”by expanding the definition of cheque as given in the
exixting Act.
• A cheque in the Electronic form means a cheque which contains
the exact mirror image of a paper cheque. It is generated, written
and signed in a secure system maximizing safety standards with the
use of digital signature a symmetric crypto system.

8. 3. A Truncated cheque:
• A truncated cheque means a cheque which is abbreviated during the course of
a clearing cycle, either by the clearing house or by the bank, whether paying or
receiving payment, immediately on generation of an electronic image for
transmission, substituting the further physical movement of the cheque in writing.
• Characteristics of a Truncated Cheque:
 The electronic image will replace the physical image.
 Either the concerned bank or the clearing house will generate the electronic image
of a cheque, it is called truncation of a cheque.
 At the time of truncation, the physical cheque will be substituted by the electronic
cheque., it is for the purpose of reducing the time taken in realizing its payment.
 The paper cheque will be retained by the bank/ clearing house after truncation.