(a) "Acceptance" means execution of payment instruction.

(b) "Bank" means a banking company as defined in Section 5 of the Banking Regulation Act, 1949, and includes the State Bank of India, constituted by the State Bank of India Act, 1955, a subsidiary bank constituted under the State Bank of India (Subsidiary Banks) Act, 1959, a corresponding new bank under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and a corresponding new bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, a co-operative bank, as defined in Section 56 of Part V of the Banking Regulation Act, 1949 (AACS) and such other banks as may be specified from time to time.

(c) "Beneficiary" means the person designated as such, and to whose account payment is directed to be made in a payment instruction.

(d) "Beneficiary / Destination Bank / Branch" means the branch of the bank / branch identified in a payment instruction which is maintaining the account of the beneficiary.

(e) "NEFT Clearing Centre" means any office designated by the Nodal Department for receiving, processing and sending the NEFT SFMS message and the debiting and crediting of accounts of the participating banks and institutions for settlement of payment obligations or one or more of these functions. The National Clearing Cell, Reserve Bank of India, Nariman Point, Mumbai has been designated as the NEFT Clearing Centre (NCC) for purposes of the NEFT System.

(g) "NEFT Service Centre" means an office or branch of a bank in a centre designated by that bank to be responsible for processing, sending or receiving NEFT SFMS message on behalf of that bank in that Centre and to do all other functions entrusted to a NEFT Service Centre by or under these guidelines. NEFT Service Centre is referred to as "Sending NEFT Service Centre" when it originates an NEFT SFMS message for funds transfer. NEFT Service Centre is referred to as "Receiving NEFT Service Centre" when it receives a NEFT SFMS message from the NEFT Clearing Centre.

(h) "NEFT System" means the National Electronic Funds Transfer System established by these guidelines for carrying out inter-bank funds transfers within India (and from India to Nepal), and providing for settlement of payment obligations arising out of such funds transfers, among the participating banks.

(i) "Execution" of a payment instruction in relation to a sending bank means the transmission or sending of the payment instruction by it to the NEFT Service Centre; in relation to a Service Centre it means transmission of the consolidated payment instruction in the encrypted NEFT SFMS message to the NEFT Clearing Centre.

(j) "Funds Transfer" means the series of transactions beginning with the issue of originator's payment instruction to the sending bank and completed by acceptance of payment instruction by the beneficiary's bank for the purpose of making payment to the beneficiary of the instruction.

(k) "Nodal Department" means the Department of Payment and Settlement Systems of Reserve Bank of India, NEFT Clearing Centre and the Mumbai Regional Office of the Reserve Bank of India which are responsible for implementation, administration and supervision of the NEFT System.

(l) "Notified" means communicated electronically or in writing.

(m) "Originator / Sender" means the person who issues a payment instruction to the sending bank.

(n) "Participating Bank” means a bank admitted for participating in the NEFT System pursuant to Paragraph 3.1 of these Guidelines and whose Letter of Admission has not been cancelled.

(o) "Payment Instruction" means an unconditional instruction issued by an originator in writing or transmitted electronically to a sending bank to effect a funds transfer for a certain sum of money expressed in Indian Rupees, to the designated account of a designated beneficiary by debiting correspondingly an account of the originator or through remittance of cash.

(p) "Public Sector Bank" means State Bank of India, constituted by the State Bank of India Act, 1955, subsidiary banks constituted under the State Bank of India (Subsidiary Banks) Act, 1959, the banks constituted under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the banks constituted under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. IDBI Bank has since been classified as a Public Sector Bank.

(q) "Reserve Bank of India" means the Reserve Bank of India or RBI established under the Reserve Bank of India Act, 1934 (2 of 1934).

(r) "Security Procedure" means the set of procedural guidelines at Paragraphs under the Sections of these Guidelines for the purpose of :

(i) verifying that a payment instruction, a communication authorising a payment instruction or a NEFT Data File is authorised by the person from whom it purports to be authorised; and

(ii) detecting error in the transmission or the content of a payment instruction, a communication or a NEFT SFMS message.

(s) "Sending / Originating Bank" means the branch of a bank, which receives payment instruction from its customer or any other person for transfer of funds to the account with another bank participating in NEFT. When the originator is a participating institution, reference to sending bank shall be construed as referring to the NEFT Service Centre.

(t) "Settlement Account" means an account maintained by a participating bank or institution for the purpose of settlement of payment obligations under the NEFT System.

(u) "Valid Reasons of Non-payment" are the reasons due to which the beneficiary bank fails to or cannot make payment to the beneficiary. Some illustrative reasons are :  

(i) Beneficiary not having an account with the beneficiary bank  

(ii) Account number indicated in the payment instruction not matching with the number as recorded at the beneficiary bank.  

(iii) Dislocation of work due to circumstances beyond the control of the beneficiary bank such as earthquake, fire, etc., at the place where the beneficiary's account details are maintained, etc.  

(iv) Any other valid reason preventing passage of the credit – such as a court order restraining operations on the Beneficiary's account. The reason shall be explicitly indicated.

(v) "SFMS Message" means an electronic Structured Financial Messaging Solution (SFMS) message containing a batch of payment instructions for funds transfer, processed and consolidated in the manner specified for transmission of payment instructions and communication related thereto.

(w) "Credit" means credit received by the NEFT member through the NEFT System, which has to be ultimately credited to the account of the beneficiary customer at the concerned branch of the beneficiary bank, after due verification thereof.

(x) "IFSC" means Indian Financial System Code used to identify a participating bank branch in the NEFT SFMS message.

(i) Admission : To be eligible to apply for admission as a participating bank, an applicant –

(a) shall be a bank. Regional Rural Banks (RRBs) can also participate through their sponsor bank in accordance with the guidelines issued by RBI.

(b) shall be a member of the Real Time Gross Settlement (RTGS) System.

(c) shall have installed SFMS.

(d) shall meet the other prescribed eligibility criteria / conditions which are notified by RBI from time to time (eligibility criteria for the present is indicated in Annexure IV).

Provided that, all or any of the above conditions may be relaxed or dispensed with, if so decided by the Reserve Bank of India.

List of participant banks and bank-branches will be displayed on website of Reserve Bank of India under the link http://www.rbi.org.in/Scripts/neft.aspx.

Any bank or institution desirous of participating in the NEFT System as a participating bank may submit to the Regional Director, Reserve Bank of India, Mumbai Regional Office, Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001, duly authenticated application, containing full particulars in the form specified at Annexure I (Form : NEFT-IA). Every application shall be accompanied by an undertaking in the specified form to abide by the Procedural Guidelines in the event of admission.

Letter of Admission as specified in Annexure II (Form : NEFT-IB) to every bank admitted to the NEFT System will be issued by Reserve Bank of India.

(ii) Suspension :

(a) If a participating bank has defaulted in meeting its settlement obligations or paying any charges or fees or complying with any procedural guideline provisions or for any reasons specified at paragraph 5(iv), the Letter of Admission issued to it is liable to be kept under suspension for such period as may be specified in the order of suspension.

(b) Every order of suspension shall be notified immediately to all the participating banks and institutions including the bank or institution against which the order of suspension is passed.

(c) An order of suspension may be reviewed and may be revoked at any time by the Reserve Bank of India upon representation received from the concerned bank or on its own. Every revocation shall be notified immediately to all participating banks.

(d) A participating bank shall not, while any order of suspension is in force against it, be entitled to send or receive any NEFT message or otherwise to effect any funds transfer in the NEFT System.

(e) Provided that a suspension shall not affect the obligations of the suspended bank or institution, whether incurred before or after the suspension.

(iii) Withdrawal from Participation :

(a) Any participating bank or institution may, by giving a notice of one month to the Regional Director, Reserve Bank of India, Mumbai Regional Office, withdraw from participating in NEFT System.

(b) No notice under these guidelines shall be effective unless it is given in writing and before the expiry of one month from the date of receipt of notice by the Regional Director, Reserve Bank of India, Mumbai Regional Office, Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001.

(c) Notwithstanding its withdrawal, a bank shall discharge all its payment obligations arising out of fund transfers attributable to it, whether effected before or after the withdrawal became effective.

(d) The withdrawal of any participating bank shall be notified to all the participating banks by the Regional Director, Reserve Bank of India, Mumbai Regional Office, Shahid Bhagat Singh Marg, Fort, Mumbai - 400 001.

(iv) Cancellation of Letter of Admission : Letter of admission issued to a bank may be cancelled by the Reserve Bank on it being satisfied that such bank has –

(a) defaulted in complying with any Regulations / Procedural Guidelines / admission terms and conditions / instructions issued from time to time.

(b) been placed under an order of moratorium or an order prohibiting acceptance of fresh deposits or an order of winding up or in respect of which a provisional liquidator has been appointed.

(c) stopped or suspended payment of its debts.

(d) failed to get the order of suspension passed against it under Regulation 8(e) of the Uniform Regulations and Rules for Bankers' Clearing Houses (URRBCH) revoked within a period of three months from the date of order of suspension.

(e) has conducted its transactions in the NEFT System in a manner prejudicial / detrimental to the interest, integrity or efficiency of the System.

No order of cancellation shall be passed without first giving an opportunity of hearing to the bank concerned.

Every order of cancellation shall be notified to the respective bank and also to all other participating banks in the NEFT System.

Notwithstanding the order of cancellation of Letter of Admission passed against it, such bank shall discharge all its payment obligations arising out of the funds transfers effected in the NEFT System.