April 26, 2023

What is the Difference Between NEFT and RTGS: Charges & Transactions

Difference between NEFT and RTGS

Electronic Funds Transfer (EFT) systems in India have been in use for several decades and have undergone significant advancements in recent years. These systems allow for the transfer of funds electronically between banks, financial institutions, and individuals. The Reserve Bank of India (RBI) is the regulator for Electronic Fund Transfer (EFT) systems in the country, and it has implemented several measures to ensure the security and reliability of these systems.
The Indian government has also been promoting the use of Electronic Fund Transfer (EFT) systems for various government schemes and services, such as the direct benefit transfer (DBT) scheme, which aims to transfer government benefits directly to the bank accounts of beneficiaries. This has helped to increase the transparency and efficiency of government services and has also helped to reduce corruption.
The Electronic Fund Transfer systems in India have played a significant role in the growth of the digital economy in the country and have greatly increased the accessibility and convenience of financial transactions for individuals and businesses.
One of the most widely used EFT systems in India is the National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) system. It allows for the transfer of funds between banks in India and is available 24x7.

What is National Electronic Funds Transfer (NEFT)

National Electronic Funds Transfer (NEFT) is an electronic funds transfer system in India that allows for the transfer of funds between banks. The Reserve Bank of India (RBI) manages the NEFT system, which operates on a deferred net settlement basis, meaning that transactions are settled in batches at regular intervals during the day. NEFT enables customers to transfer funds to any bank branch in the country, using the Indian Financial System Code (IFSC) of the beneficiary bank branch. It is widely used for small and medium-value transactions, such as salary payments, vendor payments, and personal transactions. NEFT transactions are settled on an hourly basis, with settlements taking place at half-hourly intervals from 8:00 am to 7:00 pm on weekdays and from 8:00 am to 1:00 pm on Saturdays.

Real Time Gross Settlement (RTGS)

Real Time Gross Settlement (RTGS) is an electronic funds transfer system in India that allows for the transfer of large value transactions between banks in real-time. The Reserve Bank of India (RBI) manages the RTGS system, which operates during the RBI's business hours. Transactions processed through RTGS are settled on a real-time basis, as opposed to the deferred net settlement used in the National Electronic Funds Transfer (NEFT) system. RTGS is considered to be more secure and reliable than other EFT systems, as it minimizes the risk of fraud and errors. It is mainly used for high-value transactions, such as large business payments, government transactions, and inter-bank transactions.
Both systems are used for the transfer of funds between banks, but they differ in several key ways.
  • Settlement of transaction-One of the main differences between National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) is the way they settle transactions. National Electronic Funds Transfer (NEFT) transactions are settled in batches, typically every hour. This means that if you initiate a NEFT transaction, the funds may not be credited to the beneficiary's account until the next batch settlement. On the other hand, RTGS transactions are settled on a real-time basis, meaning that the funds are credited to the beneficiary's account as soon as the transaction is initiated.
  • Transaction limits -Another key difference between the two systems is the minimum and maximum transaction limits. For National Electronic Funds Transfer (NEFT), the minimum transaction limit is INR 1, while there is no upper limit. For RTGS, the minimum transaction limit is INR 2 Lakhs and there is no upper limit. This means that Real Time Gross Settlement (RTGS) is mainly used for high-value transactions, while NEFT is used for smaller transactions.
  • Methods of transferring fund- The way the funds are transferred is also different between the two systems. NEFT transfers funds by debiting the account of the sender and crediting the account of the beneficiary. It can only be done in a net settlement, meaning that the funds are transferred from one account to another in a batch. On the other hand, RTGS transfers funds by debiting the account of the sender and crediting the account of the beneficiary on a real-time basis. This means that the funds are transferred immediately, and the transaction is irrevocable.
  • Time taken for the funds to be credited -The time taken for the funds to be credited to the beneficiary's account is also different between the two systems. NEFT transactions are settled in batches, typically every hour however NEFT transactions can also take up to several hours to be credited to the beneficiary's account, while RTGS transactions are credited to the beneficiary's account immediately.
  • Fees charged for settlement of transactions -Another important difference is the fees charged for the transactions. NEFT transactions have a fixed charge per transaction, whereas RTGS transactions are charged based on the amount of the transaction.
  • Security of transactions-The security of both systems is also different. NEFT transactions are considered to be less secure than RTGS transactions, as they are settled in batches and the funds may not be credited to the beneficiary's account for several hours. RTGS transactions, on the other hand, are settled on a real-time basis and are regarded as the most secure method of electronic funds transfer as it uses advanced encryption and authentication methods to protect the transferred funds. Additionally, the RBI closely monitors the system to ensure that all transactions are conducted in a safe and secure manner.
In conclusion, Electronic Funds Transfer (EFT) systems in India have greatly increased the accessibility and convenience of financial transactions for individuals and businesses. Both National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) system have their own set of advantages and disadvantages. People can make use of any of the two or any other electronic transfer system such as Immediate Payment Service (IMPS), Unified Payments Interface (UPI) etc. according to their preference, needs and requirements.

Never miss a trading opportunity with Margin Trading Facility

Enjoy 2X leverage on over 900+ stocks

Upstox Margin Trading Facility
Apple Logo
Downloadlogo
iOS App
Google Play Logo
Downloadlogo
Android App

RELATED ARTICLES

A Historical Analysis of Demonetisation: Lessons from Around the World

Demonetisation is a significant policy decision that various countries have implemented worldwide to address economic challenges and promote financial reforms. In this blog post, we will explore the concept of [demonetisation](https://upstox.com/savings-account/what-is-demonetisation-meaning/), highlight several countries that have undertaken this measure, including India, and examine the motivations, impacts, and lessons learned from these exercises. Let's dive into this fascinating topic.

How to Increase your Cibil Score: 10 Proven Steps

Your creditworthiness is measured using a metric called your credit score. Different establishments calculate an individual’s creditworthiness based on different metrics. Based on these credit scores, lenders assess your credibility and eligibility before approving your loan or other lending instruments, such as credit cards. Authorised organisations like CIBIL (Credit Information Bureau India Limited), CRIF, Equifax, and Experian provide these scores. Since CIBIL is the most popular organisation in our country, a credit score in India is often referred to as a CIBIL score. It is the document that contains your credit history.

HDFC Bank Mini Statement by Missed Call/Toll Free Number, SMS, & Online

HDFC Bank is one of the most reliable private banks in India. It is popular among customers for its round-the-clock services and a vast range of financial services and product offerings. With the aid of advancements in technology, HDFC Bank has made all its services available to its customers at their fingertips, saving a lot of time and hassle. You can get your HDFC mini statement, transfer funds, check your account balance, etc. on the go from anywhere at any time. Here is a detailed guide on HDFC mini-statement and how you can get one.

Allahabad Bank Netbanking

Technology has made it easier to fulfil the traditional package of banking services , basic and complex across the customer profile. Although the set of financial functions have not changed, digital banking has indeed made the fulfilment process more efficient and cost effective. As a case study, let us take a closer look at Allahabad bank net banking services. As one of India's oldest banks, Allahabad Bank was established in 1865 and has an operating history of over 150 years. The Bank has come a long way since inception, having evolved from a private bank formed by Europeans living in Allahabad to being nationalised in 1969 and then finally being amalgamated with Indian Bank 2020. This new entity enjoys the benefits of a larger balance sheet, wider and deeper geographic reach and a comprehensive portfolio of services, both online and offline for retail as well as corporate customers. Indian Bank has a strong domestic footprint with a branch network comprising 5,809. Besides, the bank also has footprints overseas across three branches, one each in Singapore, Colombo and Jaffna (as on June 30, 2021).