Difference between NEFT and RTGS

Because of technological improvements, the majority of banking transactions are now successfully completed online.

Following the creation of the NEFT, RTGS, and IMPS banking systems, the method through which we can transfer money has undergone a complete transformation. In only a few minutes, money can be transferred easily across bank accounts. 

The Reserve Bank of India's efforts to promote a cashless economy has been successful. Digital payments have recently been increased by the government through several initiatives.

The two most commonly used digital payment methods are RTGS and NEFT. 

A majority of people have adopted them as a result of the reduction of fund transfer fees. Depending on the needs of the user, each of these procedures is suitable and has perks and drawbacks of its own. Here, we will discuss these procedures following their differences. 

What is NEFT?

NEFT stands for National Electronic Funds Transfer. This funds' transfer service can be used around the clock and transactions are handled in batches of half an hour. No minimum or maximum transfer amount limits have been established by the RBI. It was introduced in 2005. 

One may not incur any additional fees if they transfer money utilising a bank's mobile app or through online banking using the NEFT procedure. However, there are some transfer fees applied if one chooses to make a NEFT transfer in person at a bank.

For instance, depending on the amount of money you want to transfer, XYZ bank may charge you anywhere between Rs. 2.50 and Rs. 25 (excluding GST). Because the RBI permits remittance of the cash in two hours, this payment of funds is carried out using batch systems on an order-by-order basis.

Any settlement made utilising the InterBank Transfer Scheme (IBTS) or the RBI's books renders the transfer irrevocable and final. Following that, the RBI notifies the sending bank, which notifies the sender, of such money transfers.

What is RTGS?

RTGS, or Real-Time Gross Settlement allows money to be transferred instantly from one account to another.

Introduced in 2004, the RTGS system is mainly designed to handle large volumes of transactions. Therefore, while there is no cap on the transfer amount, you must send at least Rs. 2 lakhs at a time. 

When the transaction amount is large and payment must be done right away, RTGS is particularly helpful.

For instance, the maximum recommended transfer limit for an ABC bank may be Rs. 10 lakh, while the daily maximum transfer limit for an XYZ bank may be Rs. 20 lakh.

Similar to the NEFT procedure, there is no additional price for completing the RTGS transferring online, however, there is a fee from the bank if you use the RTGS transferring in person at a bank branch.

NEFT Vs. RTGS

The primary difference between RTGS and NEFT is that the former is founded on gross settlement, whereas the latter is founded on net settlement.

Gross settlement refers to the one-to-one completion of a transaction without grouping it with other transactions. On the other hand, net settlement refers to the completion of the transactions in batches at predetermined periods.

In this case, all transfers will be put on hold until a certain time. RTGS transactions are handled throughout the system's business hours.

Secondly, when using RTGS, the money is transmitted right away and appears in the beneficiary's account within the allotted 30 minutes.

The amount of transfer time for NEFT transactions often takes up to two hours, but this is dependent on batch times and cutoff times.

There are numerous batches between the hours of 8 am and 7 pm, which results in a batch every half-hour; this is only true on working days. As a result, RTGS transfers funds far more quickly than NEFT.

Thirdly, The minimum amount required to complete an RTGS transaction in retail banking is INR 2 Lakhs, but there is no maximum transaction amount set forth.

There is no set minimum or maximum amount for NEFT transactions in retail banking.

As a result, NEFT can be used for smaller transactions as well, whereas RTGS should only be used for larger transactions.

Important Factors to consider for Fund Transfers

NEFT Vs RTGS

RTGS 

NEFT

Settlement

The primary difference between RTGS and NEFT is that the former is founded on gross settlement, whereas the latter is founded on net settlement. Gross settlement refers to the one-to-one completion of a transaction

On the other hand, net settlement refers to the completion of the transactions in batches at predetermined periods. In this case, all transfers will be put on hold until a certain time. RTGS transactions are handled throughout the system's business hours.

Transfer time 

When using RTGS, the money is transmitted right away and appears in the beneficiary's account within the allotted 30 minutes. There are numerous batches between the hours of 8 am and 7 pm, which results in a batch every half-hour; this is only true on working days. As a result, RTGS transfers funds far more quickly than NEFT.

The amount of transfer time for NEFT transactions often takes up to two hours, but this is dependent on batch times and cutoff times.

Minimum Transfer Value

Rs. 2 lakh 

Rs.1 

Payment mode 

The RTGS should be used only for large value transactions.

The NEFT can be used for all smaller transactions.

Transaction Charges 

There are no charges if you are at the receiving end of the RTGS fund transfer.


  • No charges are applied on transfers initiated online via internet banking and/or mobile banking.


  • For all the fund transfer requests between Rs.2 Lakh and Rs.5 Lakh, banks can charge their customers a maximum of Rs.30 per transaction.


  • For transactions above Rs.5 Lakh RBI sets a cap of Rs.55 per transaction.

  • Maximum of Rs. 2.50 (+ GST) for transfers up to Rs. 10,000.

  • Maximum of Rs. 5 (+ GST) for transfers above Rs. 10,000 and less than Rs. 1 Lakh.

  • Maximum of Rs. 15 (+ GST) for transfers above Rs. 1 Lakh and less than Rs. 2 Lakh

  • Maximum of Rs. 25 (+ GST) for transfers above Rs. 2 Lakh.

Timings 

Available 24×7 

NEFT transactions are available 24×7 and 365 days on all days of the year.

Prerequisites 

To initiate an RTGS request, you need to furnish certain details to your bank or branch. These details include:

  •  the name of the beneficiary

  •  the amount to be remitted

  • account number of the beneficiary account

  •  the number of the sender

  • contact information if needed and the IFSC code.

  • To be able to use the NEFT mode of payment or transfer, the beneficiary needs to have a savings or current bank account

  • If you do not have a bank account, you can still proceed with NEFT

  • You would need to visit a bank that is a part of the NEFT network and proceed with transfers

  • The only issue is that such remittance is restricted at RS. 50,000 per transaction. People using net banking or mobile banking can do NEFT fund transfers online as well

Chances of Failure 

RTGS is merely a different mode of fund transfer, there are some situations where the request might fail.

NEFT fund transfers may rarely fail due to some technical glitch that may happen at the time of a heavy load of payments.

The minimum amount required to complete an RTGS transaction in retail banking is INR 2 Lakhs, but there is no maximum transaction amount set forth. There is no set minimum or maximum amount for NEFT transactions in retail banking. As a result, NEFT can be used for smaller transactions as well, whereas RTGS should only be used for larger transactions.

Which method is most effective for oneself?

This depends on the need for the money to be transferred and the motivation behind the move.

For instance, NEFT is the greatest method for transferring little sums of money, although it takes some time to reach the recipient.

Only when transacting business with larger sums or sending money to someone for any asset or property dealings is RTGS effective.

Conclusion

Regardless of which method you choose, both are equally safe, secure, and controlled by the Reserve Bank of India. In order to develop the country's advanced economy, both NEFT and RTGS are trustworthy payment methods.

NEFT and RTGS Related FAQs

Ans: Online money transfers can take up to two business days, at most, to complete. Services like IMPs and UPIs enable instant money transfers.

Ans: Yes, we do require a bank account. NEFT is a method for transferring money from one account to another.


Ans: Only Indian Rupee transfers between participating banks in the nation may be made using this system.


Ans: The government ensures the highest level of security and safety for RTGS transactions. Being mostly utilised for larger-value transfers of money makes it even more reliable.

Ans: The payments are final and irrevocable because the money settlement occurs on the Reserve Bank of India's books.


Ans: An RTGS remittance must be initiated by the remitting customer giving the following information to a bank:

  • The amount that needs to be paid

  • The debiting account number

  • Name and branch of the beneficiary bank

  • The IFSC number of the receiving branch

  • Customer's beneficiary's name

  • Customer's beneficiary's account number

  • Information on the sender and recipient, if any

Ans: The confirmation will be delivered to you by email or SMS.

Ans: NEFT limits for retail or third-party transactions may vary between banks. For cash transactions at bank branches, a maximum of INR 50,000 may be transferred. You are allowed an unlimited amount of cash transactions, according to the RBI.

Ans: There is no maximum transaction or transfer amount for RTGS. The system is accessible every day, 365 days a year. The beneficiary account receives the payments in real-time.

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