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

What are QR Codes & How to Scan - Meaning, Full Form, & Types

Quick Response (QR) codes have become increasingly prevalent in recent years. Invented in Japan in the early 1990s, these two-dimensional barcodes have revolutionised how information is shared, accessed, and stored. This post explores the definition of QR codes, their different types, and how they work.

What is Cheque Leaf and How to Cancel & Write: Meaning & Filling

The Cheque leaf is a basic and primary instrument for every account holder. The moment one opens a bank account, the bank provides every holder with a chequebook. This chequebook is a compilation of instruments referred to as cheque or cheque leaf. This cheque leaf is used to make payments to various individuals, Institutions and organizations.

5 Smart Financial Tips for Young Adults

Summary: Your 20s and 30s are a crucial time to start building a strong financial future. By making smart money decisions now, you can set yourself up for success later in life. In this blog post, we'll share five essential financial tips for young adults, including budgeting, saving, investing, and retirement. Money management secures your future, whether that's covering an unexpected bill or saving for a significant purchase. It involves budgeting, saving, and investing – essential skills for a stable financial future that are frequently overlooked in education. This blog will guide you through five practical financial tips that are simple to understand and apply. So, let's get started. Top 5 personal financetips for young adults Handling your money well is key—it's what keeps you secure when life throws surprises and helps you grow your savings for the future. It's about saving where you can, investing with a plan, and not spending more than what comes in. Nailing these basics can turn things around for you. So here they are, the top five financial tips for young adults: - Create a budget and track your expenses Budgeting is about tracking your income and expenses to make sure you spend less than you earn. It's creating a plan for your money, so you're in control of where it goes. Let's say you bring home INR 30,000 a month. You might allocate INR 10,000 for rent, INR 7,000 for food, and INR 3,000 for travel. Out of what’s left, you could put INR 5,000 into savings for emergencies or future goals, and the remaining INR 5,000 could cover your mobile plan, internet, or a weekend outing. This way, you've got your expenses covered, your savings on the rise, and still keep some money aside for leisure and unexpected needs. It's about making intentional choices so that you can balance today's needs with tomorrow's plans. - Start saving today Saving helps you build an [emergency fund](https://upstox.com/market-talk/emergency-fund-101-how-to-start-and-why-its-crucial-for-your-finances/), a cushion of money for unexpected expenses or emergencies. It also enables you to reach your short-term and long-term goals, like buying a car, going on holiday, or starting a business. A good rule of thumb is the 50/30/20 strategy. After you've covered your necessary expenses, 50% of your income, allocate 20% directly to your savings. For a monthly income of INR 30,000, that's INR 6,000 going into your savings each month. You can channel these funds into [mutual funds](https://upstox.com/learning-center/mutual-funds/the-basics-of-mutual-funds/), which often yield higher returns over time compared to a regular savings account. The remaining 30% of your income can then be used for discretionary expenses. By sticking to this rule, you automatically prioritise your financial future every month, steadily building a fund that can support big life events or tide you over during tough times. - Invest your money wisely Investing allows your money to actively work for you by acquiring assets that may generate income or appreciate over time. It's a handy way to grow your funds, beat inflation, and hit major milestones like buying a house, funding your studies, or setting up a cosy retirement. Take mutual funds, for instance. You can start small with SIPs from INR 500 and gradually build a mixed bag of investments. If you're not big on taking risks, a balanced mutual fund could be your thing, offering a steady blend of stocks and bonds. Make sure your investment picks match how much risk you're okay with, how long you plan to invest, and what you're hoping to achieve financially. - Plan your retirement ahead Retirement may feel like a dot on the horizon, but the earlier you begin, the better off you'll be. Consistently contributing a manageable amount, say INR 2,000, to a retirement plan like the [NPS](https://upstox.com/saving-schemes/nps-national-pension-scheme-india/), each month can amass a substantial sum over the years. This is where compounding comes into play – the interest you earn starts earning interest of its own, and over time, this growth accelerates. So, by starting in your 20s, you give your savings the longest possible time to expand, ensuring you a more comfortable and financially secure retirement. - Understand taxes Familiarising yourself with tax-saving opportunities, like investing in the [public provident fund (PPF)](https://upstox.com/saving-schemes/public-provident-fund-ppf-interest-rate/) and [equity-linked savings schemes](https://upstox.com/learning-center/mutual-funds/what-is-elss-and-how-to-invest-in-elss/) (ELSS) under Section 80C, can make a big difference to your finances. For those in a higher tax bracket, directing up to INR 1.5 lakh into a PPF can significantly cut your taxable income. This astute handling of taxes ensures you're not just meeting legalities but also retaining more income for your aspirations. Your best investment is in your financial education. Stay informed about financial products and market trends. This doesn't mean you need to become an expert overnight but understanding the basics of investments, insurance, and savings will help you make smarter decisions. Wrapping up: Key points to remember - Begin with small investments and increase over time, balancing risk with a mix of assets for long-term growth. - Small, regular contributions to a retirement fund can grow significantly, thanks to compounding interest. - Investing in options like PPF and ELSS can reduce taxable income and maximise savings. Note: To help plan your trading activities and investment strategies, find here the [NSE Holidays 2023](https://upstox.com/stocks-market/nse-holidays-2023/), [BSE Holidays 2023](https://upstox.com/stocks-market/bse-holidays-2023/), [MCX Holidays 2023](https://upstox.com/stocks-market/mcx-holidays-2023/), and [Muhurat Trading 2023](https://upstox.com/stocks-market/muhurat-trading-2023/). Also see here to know more about the [stock market timings](https://upstox.com/stocks-market/nse-bse-share-market-timing-in-india/).

What is Net Banking?

Technology is the game changer, the disruptive and transformational force to reckon with across all industries. Pushing the envelope of traditional banking channels, internet or net banking is increasingly becoming popular among retail and domestic customers who have been swept by the swift, seamless, secure, flexible and adaptable digital product and service offerings through faceless, paperless transaction (cheques, demand drafts, passbook, pay-in-slips) and cashless transactions ( ATM, debit card, IMPS, NEFT, RTGS etc)by banks across India. Infact, when against the backdrop of Covid-19 pandemic it had become chaĺlenging to step out of home even to visit an ATM or bank branch. One had this unsettling fear of stepping into the crowds. Consequently, the pace of adoption of netbanking services has been on the rise in recent times. As the scale and pace of netbanking adoption gathers momentum, Banks across India continue to invest in enhancing their digital foundation architecture which is in synchronisation with the latest technology, risk profile, and within the regulatory ambit. Consequently, trustworthiness has and always will be the single most valued USP of the bank, besides its ability to provide personalised offerings to its customers. Just to give you a perspective, digital banking was introduced in India in the mid-1990s with ICICI Bank being the foremost player to adopt digital technology. Over the years, the Indian digital banking landscape evolved with all banks offering digital solutions. The major impetus came in 2016, with the launch of UPI ( Unified Payment Interface) system which further democratised the digital banking landscape. Today, you can make digital payments in a variety of ways such as: