what is the difference between NEFT and RTGS ?
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Answer Posted / mahesh
NEFT and RTGS are the two convenient modes of money
transfer between banks in India.
The acronym “RTGS” refers to for Real Time Gross
Settlement, it is a unique and popular fund transfer
mechanism which enables the transfer of money between two
banks on a “real time” and on “gross” basis.
“NEFT” is the abbreviation for National Electronic Funds
Transfer which is an online system for transferring funds
between financial institutions. This system was introduced
in 2005 and is highly improved version of EFT (Electronic
Funds Transfer) which was confined to a select centre.
•The fundamental difference between RTGS and NEFT which can
be clearly educed from the above definitions is that RTGS
is based on gross settlement and NEFT is a net-settlement
process.
•RTGS is the swiftest money transfer system through the
banking channel as it is done in real time (‘push’
transfer), while NEFT being net based is comparatively
slower than RTGS.
•In RTGS payment transaction will not involve any waiting
period which is the true meaning of “real time” settlement.
Under normal circumstances the transactions are settled as
soon as they are processed by remitting bank. The
transaction is settled on one-one basis without clustering
any other transaction making it a “Gross settlement”. The
transaction is considered irrevocable as the money transfer
occurs in RBI records. NEFT functions on a deferred net
settlement (DNS) basis where transactions are completed in
batches at specific times. These settlements takes place at
a particular point of time and all transactions are held up
till that time
•Another significant factor that differentiates RTGS and
NEFT is fixing a floor limit. RTGS is an exclusive message
based transfer mechanism for an amount over Rs 2 lakhs i.e
the minimum amount to be remitted through RTGS is Rs.2
lakhs. There is no upper ceiling for RTGS transactions.
Contrary to that, NEFT is used mainly to transfer funds
below Rs 2 lakhs, and this system is most commonly used for
smaller value transactions involving smaller sum of money
i.e from an amount as minute as one rupee. However, there
is no maximum limit for transfers through NEFT.
•In RTGS the beneficiary bank credits the beneficiary’s
account in a span of two hours post the receipt of funds
transfer message. RTGS transactions are processed
throughout the working hours of the system. Marking its
difference yet again NEFT is done on net basis where the
bank clubs transactions together and only the net amount is
transferred. This settlement usually takes place 7 times a
day on weekdays and 3 times on Saturdays. NEFT takes place
within the same day if it is within the cut-off time and
the next working day if it is beyond the prescribed cut-off
time.
•Majority of the commercial banks have employed RTGS and
it is available in over 30472 numbers of branches while
the count of banks which have purchased the software
required to facilitate NEFT based transaction are over 89
and NEFT facility is available at approximately 32407
branches of banks in India. These branches may be available
in remote corner of country also.
Hence, RTGS and NEFT though distinct in their functionality
and process, are unique and similar in their ultimate
service which is now rendering plethora of advantages
making the easiest service available in service sector
industry across globe.
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