To understand the difference between NEFT and RTGS, first of all, we need to know, what is NEFT and RTGS and what are its charges, timings and limits.
Whenever you enter a bank these days, it is very common to hear the bank official suggesting someone to do a NEFT and RTGS and this makes you wonder, what this jargon is all about. Today, we will try to demystify and dissect the intricacies of NEFT and RTGS.
Gone are the days when the banking system used to take a minimum of one week to transfer the funds from one city to another. With the proliferation of technology and its successful application in our banking system, these types of transaction has become a job of minutes sans all the traditional complexities involved.
Reserve Bank of India, the public-friendly apex regulator of the banking structure in India has introduced two path breaking mechanisms to handle both inter and intra city funds transfer and these two facilities are as mentioned below:
- National Electronic Funds Transfer (NEFT)
- Real Time Gross Settlement (RTGS)
NEFT and RTGS – Meaning
National Electronic Funds Transfer (NEFT) is an electronic fund transfer service managed by RBI wherein the transfer can be done amongst the banks in any city on deferred net settlement basis. This service can be availed by any individual, firm or a corporate maintaining an account with a bank to transfer funds from his bank to another NEFT-enabled bank branch.
Real Time Gross Settlement (RTGS) is a facility managed by RBI wherein the funds transfer is done on real time basis unlike NEFT wherein the funds are settled batch-wise. Currently, it is the fastest available mode of funds transfer between two different bank accounts.
NEFT and RTGS – Timings
NEFT settlement is done in hourly batches with twelve batches between 8 AM and 7 PM available on weekdays i.e. Monday to Friday and six batches on Saturday’s between 8 AM and 1 PM. With this facility, the time consumed to transfer funds has been drastically reduced from the time taken to transfer through traditional methods such as cheque and demand drafts. A person can expect to get the funds transferred via NEFT on the same day in all the batches except for the last two on any day and for the remaining, the funds are normally credited in the morning of the next day. If for any reason, the funds are not credited into the beneficiary’s account, then they are returned within two hours and the sender receives the money back in almost three to four hours’ time.
RTGS funds are settled on real time basis and the beneficiary bank has to settle the funds in maximum two hours’ time and therefore two hours is the maximum time in which a person can complete the transaction of funds.
The minimum limit of funds transfer in RTGS is Rs. 2 Lakhs and there is no maximum limit. The RTGS service can be performed on all the six working weekdays and the timings being 9.00 AM to 4.30 PM on weekdays and 9.00 AM to 1.30 PM on Saturdays.
NEFT and RTGS – Example
NEFT example – Mr. Vikram has a savings account in ICICI Bank and intends to transfer Rs. 6,500 and Rs. 27,000 to Mr. Anjani in Axis Bank and to Mr. Sambhav in Oriental Bank of Commerce respectively. He approaches his bank and completes the formality for transferring Rs. 6,500 at 11.15 AM and does the Rs. 27,000 transfer at 5.45 PM in the evening through his net banking. Now the amount of Rs. 6,500 is settled in the next available batch i.e. at 12.00 Noon and the beneficiary Mr. Anjani receives it in the next hour’s time. The Rs. 27,000 transfer is settled in the next batch of say 6.00 PM and Mr. Sambhav may receive it on the same day or maximum by the next day morning and confirmation would be sent to Mr. Vikram by his bank through an SMS. If in case, the funds are rejected, then Mr. Vikram would receive the funds back in three to four hours’ time.
RTGS example – Mr. A has an account with HDFC Bank and wants to transfer Rs. 3.00 Lakhs to his friend Mr. B who has his account in State Bank of India. He approaches the bank and completes the RTGS process at 12.00 Noon and Mr. B would receive the funds maximum by 2.00 PM.
NEFT and RTGS – Transaction Charges
Though the transaction charges for NEFT and RTGS vary from bank to bank, the banks cannot charge the customers more than what is stipulated by the RBI. These are mentioned below:
1. Inward transactions are free
2. Outward transactions:
- Rs. 2 Lakhs to Rs. 5 Lakhs: Not exceeding Rs. 30 per transaction.
- Above Rs. 5 lakhs: Not exceeding Rs. 55 per transaction.
- Inward transactions are free.
- Outward transactions:
- For transactions up to Rs. 10,000 : Not exceeding Rs. 2.50 (+ Service Tax).
- For transactions above Rs. 10,000 and up to Rs. 1 Lakh: Not exceeding Rs. 5 (+ Service Tax).
- For transactions above Rs. 1 Lakh and up to Rs. 2 Lakhs: Not exceeding Rs. 15 (+ Service Tax).
- For transactions above Rs. 2 Lakhs: Not exceeding Rs. 25 (+ Service Tax).
If we compare the merits of both the facilities, we can very easily conclude that NEFT is good for transferring smaller amount of funds below Rs. 2 Lakhs whereas RTGS is good for funds larger than Rs. 2 Lakhs, as it is faster and is settled on real time basis.
Please feel free to comment, if you have any queries regarding “NEFT and RTGS”.