Difference between NEFT and RTGS Fund Transfer

Useful for Banking Exams…….

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 While studying for Banking Exams or doing fund transfer we often come across the words NEFT and RTGS. Lets try to understand what is NEFT and RTGS and what is the difference between them. NEFT and RTGS are two main money transfer mechanisms in India. That is if we want to transfer money from one bank to another bank we have to use any one of this method.

Transferring money between two accounts in same bank is pretty straight forward and it’s an internal matter of the bank (eg: between two SBI branches and also banks within SBI Group), it does not have to deal with other banks and their protocols, however when one bank wants to send the money to another bank in India, there is a defined mechanism (eg: from SBI to ICICI, HDFC, Axis Bank etc.) it has to be done and hence NEFT and RTGS comes into our help. Both these systems are maintained by Reserve Bank of India.

NEFT – National Electronic Fund Transfer

NEFT stands for National Electronic Fund Transfer & it was launched in November 2005 by RBI. It's a system of transfer between two banks on net settlement basis. Which means that each individual transfer from one account to another account is not settled or processed at that same moment, it’s done in batches. A lot of transactions are settled in one go in each batches. Presently, NEFT services are available from 8:00 am to 6:30 pm on weekdays (Mon – Fri) and from 8:00 am – 12:30pm on Saturday. Any NEFT Transfer done between 8 am – 5 pm generally gets settled on the same day, but if you deposit the money after 5 pm, then that will be settled the next working day. In case of Saturday, any money deposited between 8 am – 12 noon can be expected to reach the beneficiary account the same day.

NEFT Transfer Example

For example: Ramesh has Axis Bank account and Suresh has a bank account in Union bank , Now Ramesh deposits Rs 50,000 in Suresh's account through NEFT transfer at  10:00 am .The money will be then taken out from Ramesh's Axis Bank Account and will be sent to  Suresh's Union bank the same day, then Union bank will credit Suresh's bank account. In case money can not be transferred to the target account (beneficiary account) , the money will be credited back to the source branch within 2 hours of the batch in which it was processed.

RTGS – Real Time Gross Settlement

RTGS stands for Real Time Gross Settlement and its a system of money transfer between two banks in real time basis, which means the moment one bank accounttransfer the money to another bank account, its settled at that time itself on real time basis between the banks, but the beneficiary bank has to make the final settlement to the bank account within two hours of getting the money. RTGS is the fastest possible moneytransfer between two banks in India through a secure channel.  ‘Real-time’ means that the payment transaction isn’t subject to any waiting period. The transaction will be completed as soon as the processing is done, and gross settlement means that the money transfer is completed on a one to one basis without clustering with another transaction.

RTGS Transfer Example

Say Vivek has a SBI Bank account and Deepak has an ICICI Bank account, Vivek transfers Rs 10 lacs to Deepak's account through RTGS transfer, SBI instantly transfers Rs 10 lac to ICICI Bank, now ICICI bank has 2 more hours to deposit it in Vijay’s account . Hence in worst case even with RTGS transfer there can be delay of 2 hours.

Differences
The fundamental difference between RTGS and NEFT, is that while RTGS is based on gross settlement, NEFT is based on net-settlement. Gross settlement is where a transaction is completed on a one-to-one basis without bunching with other transactions. As for a Deferred Net Basis (DNS), or net-settlement, this is where transactions are completed in batches at specific times. Here, all transfers will be held up until a specific time. RTGS transactions are processed throughout the working hours of the system.

RTGS transactions involve large amounts of cash, basically only funds above Rs 100,000 may be transferred using this system. For NEFT, any amount below Rs 100,000 may be transferred, and this system is generally for smaller value transactions involving smaller amounts of money. RTGS processes in real-time (‘push’ transfer), while NEFT processes in cycles during the given working day. This causes a NEFT transaction that is initiated later than the last cycle to be completed the next day.

NEFT Charges

Amount	Charges
Up to 10,000	Rs. 2.5
Above 10,000 to 1 lacs	Rs. 5
Avove 1 lacs- upto 2 lacs	Rs. 15
Above 2 lacs	Rs. 25

   
RTGS Charges

Timings	Amount	Charges
9.00 am to 12 noon	2-5 lacs	Rs. 25
	Above 5 lacs	Rs. 50
After 12 noon to 3.3.0pm (upto 12.30pm on Saturday)	2-5 lacs	Rs. 26
	Above 5 lacs	Rs. 51
After 3.30 pm	2-5 lacs	Rs. 30
	Above 5 lacs	Rs. 55

Timings & Minimum Amount

	Monday to Friday	Saturday	Minimum Amount
NEFT	8.00am to 6.30 pm	8.00am to 12.30 pm	No minimum
RTGS	9.00am, to 4.30pm	9.00am to 1.30 pm	2 lacs