Do you want to send money to your ageing parents or relatives in another city? Cheques and demand drafts are passé. Instead, you can ask your bank to wire the cash.

Electronic funds transfer (EFT) is safer, quicker and cheaper than making payments through cheques or demand drafts. Unlike telegraphic money transfers, you can send money to a beneficiary holding an account in any other bank in the 15 cities where the EFT facility is currently available.

The biggest advantage of using EFT is that the charges are the lowest for this option. Banks charge between Re 1 and Rs 1.50 for every transfer of Rs 1,000 through the electronic mode compared with Rs 3.50 per Rs 1,000 through a demand draft.

The charge for telegraphic transfers is the steepest. For example, the State Bank of India charges Rs 150 for transfer of Rs 10,000 through this mode. Bank of Baroda charges Rs 135 for the same amount and Punjab National Bank Rs 225.

Retail customers of all the branches of the 27 public sector banks and 55 scheduled commercial banks at 15 centres — Ahmedabad, Bangalore, Bhubaneswar, Calcutta, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram — are entitled to use the electronic payment system.

The trouble is that the banks aren’t doing much to promote the use of EFT by retail customers — and it isn’t difficult to see why. As their profit margins crimp, banks tend to rely more and more on fee-based incomes.

What is EFT?

It is an inter-bank transfer system. The RBI acts as an intermediary between the remitting bank and the receiving bank. A customer can walk into his/her branch and fill up an EFT form giving details of the bank account he wants to send money to. The beneficiary (the person receiving the money) does not require an account with the same bank. The funds will get electronically transferred within a day or two.

The RBI will not charge banks for EFT till March 31, 2008 so that they promote the system.

Snail mail

The conventional routes of money transfer are slow and have quite a few preconditions attached to them. For example, in mail and telegraphic transfers, the sender and the beneficiary must have accounts in the same bank, even if they are in different cities.

Payments through cheque or demand draft, however, have no such precondition. But the process takes time. If a cheque is deposited within the same city (local cheque), one can get the payment in two to three days.

For outstation cheques, the time taken would vary between three and 10 days, that too after paying a charge of Rs 25 to Rs 100 depending on the amount of money and the location of the drawee bank.

Similarly, the whole process of purchasing a demand draft, mailing it and getting it cleared in another city could take about 10 days.