The introduction of NEFT and RTGS fund transfer systems by the RBI has created a milestone in the Indian financial setup. They have become the two most preferred digital payments systems. If you are new to online money transactions, knowing the difference between NEFT and RTGS can save you precious time.
What is National Electronic Fund Transfer?
- What is National Electronic Fund Transfer?
- What is the Real-Time Gross Settlement system?
- Difference Between NEFT and RTGS
- Final Thoughts
- Frequently Asked Questions
- What is the limit on funds to be transferred or remitted through NEFT?
- What are the benefits of using the NEFT system?
- What are the operating hours of the NEFT system?
- What are the timings for RTGS payments?
- How many times can NEFT fund transfer be done in a day?
- Can RTGS transactions allow for a future date fund transfer?
- Do we need a bank account to transfer funds through NEFT or RTGS?
The Reserve Bank of India (RBI) owns and operates the National Electronic Fund Transfer System (NEFT), which is an electronic fund transfer system. It is a centralized national payment system in which funds are transferred in half-hourly batches.
NEFT does not enable a real-time fund transfer from one bank account in a bank to any other bank branch. However, the fund transfer in NEFT is possible between banks that participate in this payment system.
The NEFT payment system is available 24 hours a day, 365 days a year, and covers the entire country. NEFT transactions are completely free if you have a savings bank account in any Indian bank.
The RBI has made this service available to all participating banks at no cost. This means that no fees are levied by cooperating banks.
Apart from fund transfer, the NEFT system can also be used to pay loan EMI, credit card dues, and all types of inward foreign exchange remittances, etc.
What is the Real-Time Gross Settlement system?
Real-Time Gross Settlement is abbreviated as RTGS. Real-Time Gross Settlement is a gross settlement-based fund transfer system. It allows for continuous and real-time fund transfer settlement. The term “real-time” refers to the amount transmitted being credited to the beneficiary account immediately.
RTGS transactions are settled individually on a transaction-by-transaction basis. There is no netting. There is no maximum limit on fund transfers through the RTGS payment system. However, there is a minimum limit of ₹ 2,00,000/-. Hence, the RTGS system is preferred for large value fund transfers.
Difference Between NEFT and RTGS
The mechanism for settlement and the amount of money settled differ between RTGS and NEFT. The following are some key comparisons and differences between NEFT and RTGS:
- NEFT settlements take happen every half-hour, whereas RTGS settlements take place in real time. RTGS allows for immediate fund transfers.
- Service Hours: RTGS and NEFT are available 24 hours a day, 7 days a week.
- Transaction Charges: There is no charge for inward transactions in NEFT at destination bank branches for receiving money by beneficiary accounts. The maximum charges for outward transactions under NEFT vary bank-to-bank and have been capped by RBI. RTGS allows free inward transactions.
- 2.50,000/- to 5,50,000/- in RTGS external transactions: not more than 24.50/- (excluding of tax, if any). Over 5,00,000/-: not more than 49.50/- (excluding of any applicable tax).
- The above charges, as finalized by the RBI, must be followed by banks. They are, however, free to charge lower fees than those listed above.
- Minimum Transfer Value: For NEFT transactions, the minimum transfer value is $1. Through RTGS transfers, we can transfer a minimum of 2 lacs.
- Maximum Transaction Value: Neither of the fund transfer systems has a limit. However, certain banks may apply segment-specific NEFT limitations. A restriction of $50,000 applies to cash-based fund transfers.
- Payment Options: Both online and offline NEFT and RTGS services are accessible.
- Suitability: NEFT is better for small-scale fund transfers, whereas RTGS is better for large-scale money transfers.
- RTGS was first implemented in March 2004, whereas NEFT has been operational since November 2005. The Special Electronic Financial Transfer (SEFT) system was replaced by NEFT.
Both NEFT and RTGS are inter-bank fund transfer services that cater to diverse consumer groups. NEFT operates on a net settlement basis, whereas RTGS operates on a gross settlement basis. RTGS is a wonderful alternative if you need to transfer a significant quantity of money quickly. If you only need to send a little amount of money and have no timing limitations, the NEFT method is the way to go.
The establishment of the NEFT and RTGS networks has aided the expansion of digital payment services. It has also given rise to a cashless economy, which is great for India’s goal of financial inclusion.
Frequently Asked Questions
What is the limit on funds to be transferred or remitted through NEFT?
The NEFT mechanism allows for unlimited fund transfers. There is no limit set by the Reserve Bank of India. Banks, on the other hand, are free to set specific limitations for their customers.
What are the benefits of using the NEFT system?
NEFT allows all participating banks to send money in near-real time. It is a safe and secure fund transfer system that costs no fees to consumers with savings bank accounts who make online fund transfers. It is accessible 24 hours a day, 365 days a year.
What are the operating hours of the NEFT system?
Throughout the day, NEFT transactions are processed in batches at half-hour intervals.
What are the timings for RTGS payments?
From December 14, 2020, RTGS will be available 24 hours a day, seven days a week, all year.
How many times can NEFT fund transfer be done in a day?
Can RTGS transactions allow for a future date fund transfer?
The RTGS system does not support future-dated transactions. Only real-time transactions are permitted.
Do we need a bank account to transfer funds through NEFT or RTGS?
You must have a bank account to use RTGS to transfer funds. A person without a bank account can also transmit money using NEFT. However, such transactions are subject to a maximum limit in this case.