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Serious online NEFT money transfer error

Transferring funds electronically has become quite common. In fact, with RBI working towards a cheque-less banking system, in due course of time most money transfers would happen online.

As you would be aware, RBI offers you two modes for Inter-bank transfer using the Internet viz. National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS).

While the usual precautions to be observed when doing online transactions, including RTGS / NEFT money transfers, are widely circulated and known, there is one issue that very few people are aware of.

Let us look at this particular aspect of online money transfers, where even a very small mistake could prove very costlyTherefore, "extreme caution" is advised here.

You would have observed that whenever you wish to transfer money to someone's account, your bank asks you to furnish certain details to enable it to execute the transfer request. This typically includes the following:

- Name of the beneficiary i.e. the person to whom you wish to transfer the money
- Account Number of beneficiary
- Name of the beneficiary's bank
- IFSC code of the beneficiary's bank
- Amount to be transferred
- Your mobile number

This is where my warning of "extreme caution" comes into the picture:

If you read the relevant RBI guidelines, you would realize that most of the aforesaid information is useless. Only two things matter for the bank to transfer the money (a) the Amount and (b) the beneficiary's Account Number.

Do you see the risk here?

Suppose, while doing NEFT money transfer, you make mistake with even 'one digit' of the Account Number. If no such account exists, consider yourself lucky... the bank will credit the money back into your account.

But, if such an account does exist, the money would be transferred to the same. In other words, your money lands up in the hands of the wrong person. Now, there is NO REMEDY available to recover your money.

The bank is not responsible for checking whether the Account Number matches with the Beneficiary's Name and IFSC Code. They may have a system in place to cross-check the details, but they are not obligated to do so. As per RBI regulations "In the Indian context, given the many different ways in which beneficiary names can be written, it becomes extremely challenging to perfectly match the name field contained in the electronic transfer instructions with the name on record in the books of the destination bank. This leads to manual intervention hindering STP and causing delay in credit or due return of uncredited instructions."

The banks involved, also cannot reverse the transaction. It effectively means debiting that person's account. And this is not permitted unless that person authorizes the bank to make such a debit. (You would appreciate that banks have no means of knowing whether it was genuine mistake or you are fraudulently taking the money back which was primarily transferred for a genuine commercial transaction between you and the receiver.)

So loss of money, due to wrong Account Number provided by you, is solely and entirely yours.

The only option is to request the receiver to return the money to you. If s/he is honest, you will get back your money. If not, you have no recourse whatsoever to recover your money.

Many wrong NEFT / RTGS transfers, due to mistake in the account number, happen every day. While some are fortunate to find a fair person at the other end, there are others who have had to forgo their money to unscrupulous receivers.

Hence
a. You have to be extremely cautious to ensure that the account number is ABSOLUTELY correct while transferring money in NEFT / RTGS electronic mode.
b. If the amount is large, you could first transfer a nominal amount. If it goes Ok, the balance can then be transferred without any risk.

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