National Electronic Funds Transfer Vs Real Time Gross Settlement: All You Need To Know
Wire transfer or electronic money transfer can be carried out instantaneously today, without the involvement of bank officials. This transfer of funds - also known as online transfer - occurs either between two accounts held in the same bank, or in those located in different lenders. Interbank transfer enables electronic transfer of funds from the account of the remitter in one bank to the account of the beneficiary - either in the same bank or a different bank. In other words, electronic money transfer enables remittance of funds from one account to another account - either in the same bank (same bank, different branch) or a different bank altogether. The sender of funds is known as remitter while the recipient is known as beneficiary.
There are three common platforms for electronic money transfer available today. There are two systems of interbank transfer - Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) - that are maintained by the Reserve Bank of India (RBI). The third method, Immediate Payment Service (IMPS), is maintained by the National Payments Corporation of India (NPCI).
Here is everything you want to know about NEFT and RTGS transactions:
National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this scheme, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the scheme, according to the RBI's website.
Real Time Gross Settlement (RTGS) can be defined as continuous (real-time) settlement of fund transfers individually on an order-by-order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time. 'Gross Settlement' means that the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the fund settlement takes place in the books of the RBI, the payments are final and irrevocable, the central bank noted on its website.
How is RTGS different from NEFT?
NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually.
For example, currently, NEFT operates in hourly batches (There are twelve settlements from 8 am to 7 pm on week days and six settlements from 8 am to 1 pm on Saturdays). Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time.
Contrary to this, in RTGS transactions are processed continuously throughout the RTGS business hours, according to the RBI.
Minimum/maximum amount stipulation for NEFT/RTGS/IMPs transactions
There is no limit - either minimum or maximum - on the amount of funds that could be transferred using NEFT. However, maximum amount per transaction is limited to Rs 50,000 for cash-based remittances within India and also for remittances to Nepal under the Indo-Nepal Remittance Facility Scheme.
The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is Rs 2 lakh. There is no upper ceiling for RTGS transactions.
Processing or service charges for NEFT transactions:
The structure of charges that can be levied on the customer for NEFT is given below:
a) Inward transactions at destination bank branches (for credit to beneficiary accounts)
- Free, no charges to be levied on beneficiaries
b) Outward transactions at originating bank branches - charges applicable for the remitter
- For transactions up to Rs 10,000 : not exceeding Rs 2.50 (+ Applicable GST)
- For transactions above Rs 10,000 up to Rs 1 lakh: not exceeding Rs 5 (+ Applicable GST)
- For transactions above Rs 1 lakh and up to Rs 2 lakhs: not exceeding Rs 15 (+ Applicable GST)
- For transactions above Rs 2 lakhs: not exceeding Rs 25 (+ Applicable GST)
Processing charges/service charges for RTGS transactions:
With a view to rationalize the service charges levied by banks for offering funds transfer through RTGS system, a broad framework has been mandated by RBI as under:
a) Inward transactions - Free, no charge to be levied.
b) Outward transactions - Rs 2 lakh to Rs 5 lakh - not exceeding Rs 30.00 per transaction;
Above Rs 5 lakh - not exceeding Rs 55.00 per transaction.