Special Electronic Funds Transfer (SEFT)
Since the EFT system could enable funds transfer only from and to branches participating in the EFT process and falling within the clearing jurisdiction at the centres where clearing operations were managed by RBI, many centres were left out of the purview of such transfers. In order to widen the reach of EFT, in 2003, the SEFT scheme was introduced wherein the participating bank branches had to necessarily be computerised and networked so as to enable funds transfer within the stipulated time zone. The processing of transactions is centralised at National Clearing Cell, Mumbai and inter-bank funds settlement also takes place at Deposit Accounts Department, Mumbai office. The networked branches participating this Scheme, will submit the EFT files of their branch to the service branch (through their internal network), and the service branch will forward the files to NCC Mumbai. Thereafter, NCC Mumbai will process, arrive at the settlement figures and split the files according the beneficiary banks and branches and send these files to the service branch of the beneficiary bank. On the basis of this information, the service branch forwards the data to the branch having the account of the beneficiary through its internal network. However, this scheme has been replaced by National EFT (NEFT).
National Electronic Funds Transfer (NEFT)
RBI has taken steps to gradually replace EFT and SEFT with the NEFT scheme which uses secure digital signatures and PKI technology. The data flow is the same as SEFT except the application of the new secured environment which is compliant with IT Act, 2000. The NEFT system, an improved version of the EFT system, has enhanced security features and facilitates retail funds movement with multiple daily settlements, which enable customers to receive funds within two hours of the settlement. Today, the NEFT facility covers more than 5000 branches of 32 banks spread across 200 centres. The Reserve Bank has taken up as its mission, the expansion of the reach of NEFT to cover all computerised / networked branches of banks as outlined in the Payment Systems Vision document. The plan is to provide NEFT facilities initially at all the RTGS customer-enabled branches and thereafter, extend the same to cover almost all the computerised branches of banks across the country.
Cheque Truncation System
The use of paper based instruments as a payment method is still the most predominant mode of making non-cash payments in India. Thus, RBI plans to implement the Cheque Truncation System to enable faster realisation of cheques. Under this system, cheques will be scanned and the electronic image, instead of the physical cheque, will be transmitted in the clearing cycle. A truncated cheque is defined in Section 6 of the Negotiable Instruments Act as a cheque which is truncated 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. The legal issues related to presentment of cheques Under Section 64 of the Negotiable Instruments Act which require a cheque to be presented for payment on behalf of the holder is taken care of by redefining a ‘cheque’ under section 6 of the Negotiable Instruments Act as amended by the Negotiable Instruments (Amendments and Miscellaneous Provisions) Act, 2002 to include an electronic image of a truncated cheque. Hence, the presentment of an electronic image of a truncated cheque would amount to presentment of cheque for the purpose of section 64. The advantages of cheque truncation are that the system avoids the physical movement of the paper instruments and instead transmitting the electronic image of the truncated instruments thereby ensuring faster clearing of the instruments and reduction in the cost of processing. It is, however, open to the drawee bank to demand further information regarding a truncated cheque from the bank holding the truncated cheque in case of any reasonable suspicion about the genuineness of the apparent tenor of the instrument. Only in the case of suspicion of any fraud, forgery, tampering or destruction of the instrument, the drawee/paying bank is entitled to demand the presentment of the truncated cheque itself for verification.