What is NEFT and RTGS Difference Between NEFT and RTGS online funds transfer?

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NEFT and RTGS are the two convenient modes of money transfer between banks in India. The acronym RTGS refers to for Real Time Gross Settlement, it is a unique and popular fund transfer mechanism which enables the transfer of money between two banks on a real time and on gross basis. NEFT is the abbreviation for National Electronic Funds Transfer which is an online system for transferring funds between financial institutions. This system was introduced in 2005 and is highly improved version of EFT (Electronic Funds Transfer) which was confined to a select centre. The fundamental difference between RTGS and NEFT which can be clearly educed from the above definitions is that RTGS is based on gross settlement and NEFT is a net-settlement process. RTGS is the swiftest money transfer system through the banking channel as it is done in real time (push transfer), while NEFT being net based is comparatively slower than RTGS. In RTGS payment transaction will not involve any waiting period which is the true meaning of real time settlement. Under normal circumstances the transactions are settled as soon as they are processed by remitting bank. The transaction is settled on one-one basis without clustering any other transaction making it a Gross settlement. The transaction is

considered irrevocable as the money transfer occurs in RBI records. NEFT functions on a deferred net settlement (DNS) basis where transactions are completed in batches at specific times. These settlements takes place at a particular point of time and all transactions are held up till that time Another significant factor that differentiates RTGS and NEFT is fixing a floor limit. RTGS is an exclusive message based transfer mechanism for an amount over Rs 2 lakhs i.e the minimum amount to be remitted through RTGS is Rs.2 lakhs. There is no upper ceiling for RTGS transactions. Contrary to that, NEFT is used mainly to transfer funds below Rs 2 lakhs, and this system is most commonly used for smaller value transactions involving smaller sum of money i.e from an amount as minute as one rupee. However, there is no maximum limit for transfers through NEFT. In RTGS the beneficiary bank credits the beneficiarys account in a span of two hours post the receipt of funds transfer message. RTGS transactions are processed throughout the working hours of the system. Marking its difference yet again NEFT is done on net basis where the bank clubs transactions together and only the net amount is transferred. This settlement usually takes place 7 times a day on weekdays and 3 times on Saturdays. NEFT takes place within the same day if it is within the cut-off time and the next working day if it is beyond the prescribed cut-off time. Majority of the commercial banks have employed RTGS and it is available in over 30472 numbers of branches while the count of banks which have purchased the software required to facilitate NEFT based transaction are over 89 and NEFT facility is available at approximately 32407 branches of banks

in India. These branches may be available in remote corner of country also. Hence, RTGS and NEFT though distinct in their functionality and process, are unique and similar in their ultimate service which is now rendering plethora of advantages making the easiest service available in service sector industry across globe.

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What is RTGS ? The full form of RTGS is "Real Time Gross Settlement". RTGS can be defined as "as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting")

What do you mean by Real Time? What is the Meaning of Gross Settlement"? Here the words 'Real Time' refers to the process of instructions that are executed at the time they are received, rather than at some later time. On the other hand "Gross Settlement" means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). The settlement of funds actually takes place in the books of RBI and thus the payments are considered as final and irrevocable.

What is NEFT ? The full form of NEFT is "National Electronic Funds Transfer (NEFT). The NEFT is a nation wide payment system facilitating one-to-one funds transfer. Under this system, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having anacount with any other bank branch in the country participating in the system. RTGS Vs NEFT : Thus, we can say that both RTGS and NEFT are schemes started by RBI for the benefit of the customers which allow accounts holders in the banks to electronically transfer the funds intra-bank. In the case of RTGS, settlement

in on 'Real Time' basis whereas in case of NEFT the settlement in on batch basis and net basis. There are some other rules, regulations and differences, which we will be discussing below:What are the minimum and maximum amount of remittance under RTGS and NEFT : RTGS Minimum Amount : minimum limit Maximum Amount : ceiling (However, maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances and remittances to Nepal.) No upper ceiling No upper RS 2 lakhs NEFT No

What are the operating hours of RTGS and NEFT ? RBI has prescribed the following operating hours for NEFT : Presently, NEFT operates in hourly batches - there are twelve settlements from 8 am to 7 pm on week days (Monday through Friday) and six settlements from 8 am to 1 pm on Saturdays. RBI has prescrbed the following operating hours for RTGS : The RTGS service window for customer's transactions is available from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 13.30 hours on Saturdays for settlement at the RBI end. However, remember that the timings of both RTGS and NEFT at the bank can vary depending on the customer timings of the bank branches. Moreover, normally, banks close their own window for accepting the transactions, about 15 minutes before the above time as to allow them to put the transaction in the

system so that it reaches by the upper time limit at the RBI window. Thus, for each bank / branch the above timings may sometimes vary.

What are the processing / service Charges for RTGS and NEFT transactions : RTGS : (a) Inward Transactions : Free, no charge to be levied; (b) Outward Transactions: Rs 2 lakh to Rs 5 lakh - Not exceeding Rs 30 per transaction; Above Rs 5 lakh - not exceeding Rs 55 transactions; NEFT :

d transactions at destination bank branches (for credit to beneficiary accounts) - Free, no charges to be levied from benef

rd transactions at originating bank branches charges applicable for the remitter

nsactions up to Rs 10,000 : not exceeding Rs 2.50 (+ Service Tax)

nsactions above Rs 10,000 up to Rs 1 lakh: not exceeding Rs 5 (+ Service Tax)

nsactions above Rs 1 lakh and up to Rs 2 lakhs: not exceeding Rs 15 (+ Service Tax)

nsactions above Rs 2 lakhs: not exceeding Rs 25 (+ Service Tax)

How Much Time it takes to transfer the funds through RTGS? I do not see that transfer takes place on real time basis?

In terms of the procedure as laid down by RBI, the beneficiary branches are expected to receive the funds on real time basis i.e. as soon as funds are transferred by the remitting bank. However, there are delays due to RBI has allowed the processing at the remitting and receiving bank.

beneficiary banks to credit the beneficiary's account within two hours of receiving the funds transfer message. Thus, we do not see the transfers on real time basis and there are some delays. It is hoped that slowly this time

will get reduced as more and bank and branches improve their internal transfer system.