NEFT, i.e. National Electronic Funds Transfer is an online facility that enables the transfer of funds from one financial institution to another. NEFT operates on Deferred Net Settlement (DNS) basis in which the transactions are settled in batches, i.e., all the transactions received till a particular time are netted. The Reserve Bank of India (RBI) has allowed the customers initiate RTGS transactions on a round-the-clock basis i.e. 24×7.
RTGS stands for Real Time Gross Settlement. It is a specialized fund transfer system in which transfer of funds/securities takes place on Real-Time and on Gross basis. As per RBI, RTGS can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting).
The definition has three important constituents
Real-Time means that the instructions/transactions are processed at the time they are received and are not subjected to any waiting period.
Gross means the transactions are settled individually (on an instruction by instruction basis) and are neither bundled nor is there netting with another transaction.
Settlement – since the settlement of funds involve recording of transactions in the books of the Reserve Bank of India, once settled, the payments are final and irrevocable.
Difference between NEFT and RTGS
Though both, NEFT and RTGS are means of transferring funds from one account to another, following are the differences between the two modes:
- Basis of Settlement: The settlement of transactions cab be done in two ways, gross settlement and net settlement. In case of gross settlement,transactions are settled on one to one basis, i.e. without bunching with other transactions. In case of net settlement, transactions are completed in batches with specific time intervals. In case of NEFT, the transactions are settled on net basis, i.e., all the transactions with be kept on hold until specific time and then processed together whereas, RTGS transactions are processed on real-time basis through gross settlement.
- Amount of Transaction in Retail Banking: In case of retail banking, the minimum amount prescribed for effecting a RTGS transaction is INR 2 Lakhs, however,no limit has been prescribed for maximum amount of transaction. In case of retail banking, no minimum or maximum amount has been prescribed for NEFT transactions. Thus, NEFT can be used for small transactions also whereas RTGS is to be used only in case of transactions that involve large amount of money.
- Amount of transaction in corporate banking: In case of corporate internet banking, the minimum amount prescribed for effecting a RTGS transaction is INR 2 Lakhs, however no limit has been prescribed for maximum amount of transaction. In case of corporate banking, no minimum or maximum limit has been prescribed for NEFT transactions.
- Timings: The RBI has made RTGS and NEFT transactions available 24×7 from Monday to Sunday. Earlier, the same services were available from:
| NEFT | RTGS | |
| Timings from Mon to Fri | 8:00 am – 6:30 pm | 9:00 am – 4:30 pm |
| Timings on Saturday | 8:00 am – 12:30 pm | 9:00 am – 2:00 pm |
Thus in case of NEFT, since the transactions are processed in batches, the transactions initiated after the last cycle will be processed the next day. However, in case of RTGS, all the transactions initiated during the RTGS timings will be processed immediately on real time basis.
- Credit to beneficiary account: In case of RTGS, the amount transferred is reflected in beneficiary account on real-time basis. However, in case of NEFT, the transactions are processed in batches in hourly intervals and hence the amount is credited accordingly.
- Charges: RTGS and NEFT transactions initiated online are not chargeable. However, a nominal charge is applied on transactions initiated at the bank. In case of RTGS, the prescribed by RBI are as follows:
- In case the transaction amount is between Rs. 2-5 Lakhs, the applicable charges would not exceed Rs 30
- In case the transaction amount is more than Rs. 5 lakh, the charge would not exceed Rs 55.
In case of NEFT, following charges are applicable:
- In case the transaction amount is between upto Rs 10,000/-, the applicable charges would be Rs 2.50 + GST
- In case the transaction amount is above Rs 10,000 upto Rs. 1 Lakh, the applicable charges do not exceed Rs 5 + GST
- In case the transaction amount is above Rs 1 Lakh upto Rs. 2 Lakhs, the applicable charges would be Rs 15 + GST
- In case the transaction amount is above Rs 2 Lakhs, the applicable charges would be Rs 25+ GST
- Validity of Instruction: In the case of RTGS, instruction will expire if the same is not executed within the specified time frame i.e. it has to be executed in the same day itself for the instruction to be valid. However, in case of NEFT the instruction will be in queue and will be carried out next day if the same could not be executed within the specified time frame or same day.
- Speed of transfer: In case of RTGS, the amount is transferred immediately and it is visible in the beneficiary account within the stipulated time period of 30 minutes. For NEFT transactions, the time taken for transferring the amount is generally up to 2 hours, however,the same is subjected to the cut off timings and the time of the batches. As on working days, there are a number of batches between 8 am to 7 pm which results to a batch in every half an hour; this is only applicable for working days. Thus, the speed of transfer of amount is much faster in case of RTGS as compared to NEFT.
- Time of Introduction or Vintage – RTGS was introduced by in 2004 in the Indian banking system whereas NEFT came into existence in 2005, i.e. a year after RTGS was launched.
- Applicability: Due to the restriction on the minimum amount that has to be transferred in case of RTGS, it can be used only in case of high value transactions, i.e. in which the amount to be transferred is more than Rs 2 Lakhs. NEFT on the other hand can be used for small value transactions as well.