The SEFT Scheme has been introduced by the Reserve Bank of India, in conjunction with banks from April 1, 2003, to provide a safe, secure and same-day electronic transfer of funds across the country.

The Special Electronic Fund Transfer (SEFT) Scheme will have settlement taking place at Mumbai for inter-bank funds transfers. The scheme has been made available in over 2,500 bank branches in 500 cities. SEFT facilitates timely settlement of pay-in and pay-out under the proposed T+2 based rolling settlement in securities at stock exchanges.

The objects of the RBI SEFT System are :

1. to establish an Electronic Funds Transfer System to facilitate an efficient, secure, economical, reliable and expeditious system of funds transfer and clearing in the banking sector throughout India, and

2. to relieve the stress on the existing paper based funds transfer and clearing system.

Initially, the System would cover branches of banks as indicated by Reserve Bank of India. To facilitate quick transfer of SEFT messages, it is essential that only networked branches of banks are part of the systems. Banks' own networks could be used for inter-branch communication.

The salient features of the Scheme are:

• The Scheme is designed to provide for same day inter-bank transfer of funds between accounts maintained in any of the participating branches under the Scheme.

• The Scheme covers branches of banks that are networked so that SEFT messages could be transmitted electronically and quickly.

• Inter-bank settlement under the SEFT Scheme will be done at Mumbai with the processing being done at the National Clearing Cell, Reserve Bank of India, Nariman Point, Mumbai.

• There will be three SEFT settlement cycles on weekdays (at 12:00 noon, 2:00 p.m. and 4:00 p.m.) and two settlements on Saturday (at 12:00 noon and 2:00 p.m.).

• Credit in respect of inward SEFT requests would be given to the beneficiary's account latest before the next settlement cycle.

• Any credits that cannot be afforded to the beneficiary's account would be returned during the next settlement cycle failing which the credits would be assumed to have been effected.

• The settlement cycles under the SEFT Scheme will be distinct from the existing EFT Scheme, which will continue to operate even after the introduction of the SEFT System.

• There would be around 500 cities covered by SEFT - with the number of branches exceeding 2500.

The Scheme would facilitate timely settlement of pay-in and pay-out under the proposed T+2 based rolling settlement in securities at the Stock Exchanges.

procedural guidelines detailed hereunder, participating banks and institutions and the system of computer and communication network through which funds transfer operation would take place.

Definitions

SEFT Centre: means any office designated by the Nodal Department in each of the centres to which EFT system is extended, for receiving, processing and sending the EFT data file 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. National Clearing Centre, Mumbai is being designed as the EFT centre.

EFT Data File: means an electronic data file of a batch of payment orders for funds transfers, processed and consolidated in the manner specified for transmission of consolidated payment orders and communications concerning payment orders from EFT service branch to the EFT centre.

SEFT" Service Branch: means an office or branch of a bank or institution in a centre designated by that bank or institution to be responsible for processing, sending or receiving EFT data file of that bank or institution in that Centre and to do all other functions entrusted to an SEFT service branch by or under these Regulations. SEFT Service Branch is referred to as "Sending SEFT Service Branch" when it originates an EFT Data File for Funds Transfer. SEFT Service Branch is referred to as "Receiving SEFT Service Branch" when it receives EFT Data File from SEFT Centre.

SEFT" System: means the Special Electronic Funds Transfer System established by these Regulations for carrying out inter bank and intra-bank funds transfers within India, through EFT centres connected by a network, and providing for settlement of payment obligations arising out of such funds transfers, between participating banks or institutions.

Execution" of a payment order: in relation to a sending bank means the transmission or sending of the payment order by it to the EFT Service Branch; in relation to a Service branch it means transmission of the consolidated payment order in the encrypted EFT data file to the SEFT centre.

Funds Transfer: means the series of transactions beginning with the issue of originator's payment order to the sending bank and completed by acceptance of payment order by the beneficiary's bank for the purpose of making payment to the beneficiary of the order.

Nodal Department: means the Department of Information Technology of Reserve Bank which is responsible for implementation, administration and supervision of the SEFT System.

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

1. verifying that a payment order, a communication canceling a payment order or an SEFT Data Fie is authorised by the person from whom it purports to be authorised; and

2. for detecting error in the transmission or the content of a payment order, a communication or an EFT Data File.

Sending bank: means the branch of a bank, maintaining an account of and to which payment order is issued by the originator. When the originator is a participating institution, reference to sending bank shall be construed as referring to the SEFT centre.

Settlement Account: means an account maintained by a participating bank or institution for the purpose of settlement of payment obligations under SEFT Systems.

Valid Reasons of Non-payment: are the reasons listed as under due to which beneficiary bank fails to make payment to the beneficiary. Some illustrative reasons are :

1. Beneficiary not having an account with the beneficiary bank

2. Account Number or account name indicated in the payment order not matching with the number or name as recorded at the beneficiary bank.

3. dislocation of work due to circumstances beyond the control of the beneficiary bank such as earth quake, fire etc. at the place where the beneficiary's account details are maintained etc.

No persons shall be entitled to effect a funds transfer in the SEFT System, unless the sending bank and the beneficiary bank is admitted for participation in the SEFT System. To be eligible to apply for admission, an applicant must-

1. be a bank.

2. have attained and continues to comply with capital adequacy norms, if any, applicable to it.

3. is willing and able to comply with the technical operational requirements of SEFT System,

4. be approved by the Reserve Bank as eligible to maintain a settlement account with it.

    Provided that, having regard to the pattern of ownership and such other relevant factors, all or any of the above conditions may be relaxed or dispensed with, if so decided by the Reserve Bank of India.

Any bank or institution eligible to be admitted in the SEFT System may submit to the Nodal Department, duly authenticated application. containing full particulars in the form specified at Annexure-I (Form: SFT-IA)(to RBI Guidelines). Every application shall be accompanied by an undertaking in the specified form to abide by the Procedural Guidelines in the event of admission.

The parties to a funds transfer under this SEFT System are the sending bank, the sending service branch, the SEFT centre, the receiving service branch and the beneficiary branch.Request for SEFT by bank customer

A bank customer (i.e. sender or originator) willing to avail of the remittance facilities offered by a sending bank shall submit an "SEFT Application Form" authorising the sending bank to debit the sender's account and transfer funds to the beneficiary specified in the SEFT Application Form.

Each participating bank/institution may design the format of "SEFT Application Form". A model SEFT Application form is given at Annexure-III (Form: SFT-2A).

The sender's request for transfer of funds shall contain no condition other than date on which funds transfer process should be initiated.

The relationship between the customer (i.e. sender) and the sending bank will be governed by an Agreement to be executed between them. The Agreement shall govern every payment order issued by the customer during the period of validity of the Agreement. A Model Customer Agreement is given at Annexure-IV (Form-2B).

The value of each SEFT transactions shall be for whole rupees only. This stipulation may be clearly indicated on the SEFT Application Form.

The upper limit for individual SEFT transaction or payment order shall be fixed by the Nodal Department. Till further advice from the Nodal Department, the limit shall be Rs.2,00,00,000/- (Rupees two crores only).

A transaction within the SEFT system will be said to have been initiated when the sending bank accepts a payment order issued by the sender by issuing a "receipt" indicating the date of initiating funds transfer operation and the likely date on which the beneficiary bank may make payment to the beneficiary.

If in a single payment instruction, the sender directs payments to several beneficiaries, each payment direction shall be treated as a separate payment order.

A bank branch may reject a customer's request for funds transfer when, in the opinion of the remitting branch,

1. the customer has not placed funds at the disposal of the sending bank; or funds placed is not adequate to cover the sum to be remitted and the service charge; or

2. the beneficiary details given in the SEFT Application form are not adequate to identify beneficiary by the beneficiary bank. The essential elements of beneficiary's identification are :

   1. Beneficiary's Name    :

   2. Centre name    :

   3. Beneficiary Bank Name    :

   4. Beneficiary branch Name    :

   5. Beneficiary's Account Type    :

   6. Beneficiary's AccountNo    :

(items (a) to (d) could be codified also :

the sending bank shall prominently display at its premises the cutoff time schedules up to which shall receive the SEFT Application Forms from its customers for different settlements.

The sending bank would consolidate the applications received till the cutoff time and forward the SEFT data to the service branch via the network.

The sending SEFT service branch shall prepare SEFT Data File by using the software package supplied by the Nodal Department. Control procedure should be developed by the sending bank to ensure accuracy in data entry with reference to the data elements furnished in SEFT file. After SEFT Data File is consolidated from various branches, the Service Branch should generate consolidated EFT file and transmit the same to the SEFT centre. There shall be only one service branch per each bank.

The National Clearing Cell (NCC), of the RBI at Mumbai will be the data processing "SEFT Centre".

The remitting service branch shall transmit the EFT Data File to the SEFT centre by using the communication network designated by Reserve Bank.

The data files would be transmitted to National Clearing Centre in such a manner that they reach well before the settlement zones to be notified by the Nodal Department. To begin with three settlements would be conducted at 12.00 noon, 2.00 p.m. and 4.00 p.m. on week days and 12 noon and 2,00 p.m. on Saturdays.

After consolidating all EFT Data File received from the participants the NCC shall process the data and generate the settlement of each beneficiary bank with at least one inward remittance transaction would have an NCC Data File.

NCC Data files generated for the banks will be available in the secure website and each bank needs to download the file immediately after the conclusion of each settlement zone. Data validation at receiving SEFT Service Branch

On receipt of the NCC Data File, the receiving SEFT service branch shall first validate the file using the validation routine provided in the SEFT package. Apart from the validation with reference to the encryption key exchange with local NCC and checksum total for the entire file, the package would validate the individual records as well.

The service branch should transmit the branch wise data immediately as receipt from National Clearing Centre.

The branches would make payment to the beneficiaries on the same day by crediting the specified account of the beneficiary or otherwise placing funds at the disposal of the beneficiary. Revocation of Payment Order

A payment order issued for execution shall become irrevocable when it is executed by the sending bank. Any revocation, after the payment order is executed by the sending bank shall not be binding on any other party in the SEFT system.

No acknowledgements are envisaged under SEFT Scheme. A message, which is not returned unaffected before the next settlement zone is treated to have been completed and credited afforded to the beneficiary's account by the beneficiary branch. It is therefore vital that unaffected credits are re-transmitted back as fresh EFT transactions at the next settlement itself.

If the beneficiary specified in the sender's payment order fails to get payment through the SEFT system for some valid reasons, the sender shall be informed immediately after the sending bank gets the returned EFT. The sending bank shall also arrange to make payment to the sender by crediting the account of the sender or otherwise placing funds at the disposal of the sender.

After crediting the account of the beneficiary, the beneficiary bank shall advise the beneficiary of the payments made. The Statement of account/Pass Book entry shall indicate briefly the source of funds as well.

The sender/originator shall be entitled to claim interest at the Bank Rate from the sending bank for the period of delay in the completion of funds transfer, and/or any other penalty which may be levied/decided by RBI

In case of holiday at beneficiary branch. They have to effect the credit as the same day or latest at commencement of business on the next working day.