NEFT and RTGS explained

What NEFT and RTGS?

Before proceeding further first let’s understand concept of NEFT and what is RTGS.

1)  National Electronic Funds Transfer (NEFT) 

It is a nationwide payment system facilitating fund transfers from one person to another. With NEFT system, you can transfer funds from one bank to any other bank within India. The NEFT system also facilitates one-way cross-border transfer of funds from India to Nepal under the Indo-Nepal Remittance Facility Scheme.

Since it can transfer funds electronically, it has eliminated the need to visit a bank branch for transfer of funds.

How to Transfer Funds through NEFT

One need access to online banking / bank app for initiating NEFT. There are 4 simple steps

Step 1- Login to your online banking account using your login ID and password  .
Step 2- Go to the Fund (NEFT) Transfer Section.           
Step 3- Add beneficiary by entering details like name, bank account number and IFSC Code. To know IFSC code of receiving branch, one can go through database available on RBI site à  http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB0815.xlsx 
Step 4- Post addition of the beneficiary, you can initiate an NEFT transfer. Just enter the amount to be remitted and send.

Charges for NEFT

Fund transfer charges applicable to sender are as below: (GST excluded)

• ₹ 2.50 on transfers up to ₹ 10,000
• ₹ 5 on the transfer of ₹ 10,000 to ₹ 1 Lakh
• ₹ 15 on the transfer of ₹ 1 Lakh to ₹ 2 Lakh
• ₹ 25 on the transfer of more than ₹. 2 Lakh

Note, receiver need not pay any fees irrespective of amount.

2) Real Time Gross Settlement (RTGS)

The acronym 'RTGS' stands for Real Time Gross Settlement. As indicated by name RTGS facilitates instant transfer of money.

In NEFT, money transfer requests are clubbed together in batches by banks at backend. Such batches are settled on a half-hourly base during NEFT timings. Therefore, as compare to NEFT, RTGS is faster.

The steps involved in RTGS are similar to that of NEFT. Customers just need to select RTGS instead of NEFT.

The minimum amount to be transferred under RTGS is ₹ 2, 00,000. However, there is no upper limit.

Charges for RTGS

Charges may vary from bank to bank, however RBI has put in place ceiling as mentioned below:

1) ₹ 2, 00,000/- to 5, 00,000/- : not exceeding ₹ 24.50/- (exclusive of tax, if any)   

2) above ₹ 5, 00,000/- : not exceeding ₹ 49.50/-. (exclusive of tax, if any)

NEFT and RTGS Timings

As per RBI guidelines, National Electronic Funds Transfer (NEFT) is available 24x7 with effect from Dec 16, 2019. Also, after normal banking hours, NEFT transactions are expected to be automated transactions initiated using ‘Straight Through Processing (STP)’ modes by the banks.

RTGS is not a 24x7 system. The RTGS service window for customer transactions is available to banks from 7 am to 6 pm on a working day, for settlement at the RBI end. However, the timings that the banks follow may vary from bank to bank.

                                         

Now let’s quickly summarize the difference between NEFT and RTGS

Fund Transfer Limit

Minimum amount required to initiate NEFT is Rs 1 whereas for RTGS the minimum amount is Rs 2, 00,000. There is no max limit in RTGS per say, however, in single day max Rs 10, 00,000 (10 Lakhs) can be transferred). For cash transactions, you can transfer a maximum of Rs.50000 in each transaction

Service Availability

With effect from 16^th Dec 2019, NEFT has become 24*7 system. In NEFT, money transfer requests are clubbed together in batches by banks and settled on a half-hourly basis. RTGS works on all working days from 8:00 AM – 6:00 PM 

Fund Settlement Speed

NEFT works in half hourly batches. Currently there are 48 settlements on all days including holidays. Therefore, the beneficiary can expect to get the credit for the transactions on the same day. In Real Time Gross Settlement (RTGS), money is credited in the beneficiary’s account in real time and on gross basis. .

Fund Transfer Charges

Charges for NEFT and RTGS are as mentioned above in article.

FAQs

Q: Which one is better NEFT vs RTGS

A: For small amount and when there is no urgency (need of money in real time),            NEFT is better option as charges and minimum threshold is less. For big amount /      business transaction, RTGS is suitable

Q: Is NEFT 24 hours now

A: Yes. Including holidays

Q: Do bank charge fees for NEFT and RTGS

A: RBI has removed charges for payments via NEFT and RTGS and asked banks to          pass on the benefits to customers. However, banks do charge money for both and      fees schedule is as mentioned above

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