NEFT & RTGS – Demystified

Normally when we issue a cheque for transfer of funds form one bank account to another bank account of a different bank, it normally used to take 2 to 3 days for transfer depending upon the location of the bank branch in which the fund is to be transferred.

Thereafter came the concept of “High Value Cheques” were in, if say a cheque of Rs.5,00,000  is issued from account A to bank account b, the receiver i.e. Account B will get the credit the same day but Account A will not get debited unless the cheque goes for normal clearing, which again takes 2 to 3 days. This mode of payment started getting miss-utilised by the users wherein, they started transferring amount from their own one bank account to another to save on interest cost.

Finally this mode of payment was abolished and RTGS and NEFT’s mode of payment were brought into the payment system.

NEFT - National Electronic Fund Transfer

National Electronic Fund Transfer or NEFT is a system of transfer of funds from one bank to another on net settlement basis. This itself, says that the transfer of amount between the banks are not done at the very same moment but in batches. A lot of transactions are processed in one go in a batch. Presently NEFT services are available from 8.00 a.m. to 3.30 p.m on weekdays (Monday – Friday) and From 8.00 a.m. to 11.45 p.m on Saturday

Instruction to bank to transfer the fund under NEFT, if submitted in first half of the day gets transferred the very same day though the submission of letter in second half might get settled the next day. So, next time if someone sends you an NEFT on a particular day, and if the same doesn’t gets credited in your account, do not panic and wait until the next day. The money would be transferred to your account by the next day.

RTGS – Real Time Gross Settlement

Real Time Gross Settlement or RTGS is a mode of payment where the transactions are executed the very same day i.e. on a real time basis. This type of payments are never done in lots or batches but are executed individually. After the execution, within two the hours (in most of the cases) the concerned accounts gets debited and credited respectively. At present, in India, RTGS is the fastest mode of payment and can be done offline by sending paper to the bank or can also be done using net banking. RTGS services are available from 8.00 a.m. to 4.00 p.m on weekdays (Monday – Friday) and From 8.00 a.m. to 12.00 p.m on Saturday.

The charges for NEFT’s and RTGS’s per transaction ranges from Rs.5 to Rs.50 depending upon the amount involved.

Basic Difference: The difference between NEFT and RTGS is that any remittance up to Rs.2.00,000 is considered as NEFT and any amount above Rs2,00,000 is considered as RTGS. i.e. NEFT has an upper limit of Rs.2,00,000 whereas, RTGS has no upper limit.

Information required for making payment through RTGS and NEFT:

1. Beneficiary Account Name
2. Beneficiary Account Number
3. Beneficiary Account type: say (savings account, current account, cash credit account etc.)
4. Beneficiary Bank Name
5. Beneficiary Bank branch Address
6. Beneficiary Bank IFSC Code

Please note: Individual Bank has their own NEFT or RTGS format/application form which can either be downloaded from the bank’s website or can also be collected from the bank’s nearest branch.