What are RTGS & NEFT transactions

Latest update:

RBI on thursday (06.06.2019) informed banks that it has decided to waive charges levied on NEFT & RTGS transactions and accordingly instructed the bank to pass on the benefit to their customers. Instruction on this regard will be issued within a week.

Process of RTGS and NEFT

RTGS& NEFT transactions are the fastest electronic funds transfer systems available in India. Under the above systems, funds can be transferred from a bank by its customer to their own account or third parties having their account with another bank across the country. The RTGS and NEFT transactions are distinguished by the processing time taken by them. In RTGS, the processing of instructions takes place instantly at the time they are received rather than at some later time. NEFT operates in batches on hourly basis.

Meaning of RTGS transactions

RTGS stands acronym for ‘Real Time Gross Settlement’. The ‘Real Time’ means the processing of instructions takes place instantly at the time they are received. ‘Gross Settlement’ means the settlement of funds transfer instructions takes place separately for each instruction. Under RTGS Scheme, individuals, firms and corporate can electronically transfer large value funds to accounts of individuals, firms or corporates having accounts with any other bank branch in the country participating in the Scheme. Funds transfer operation takes place on instruction by instruction basis continuously during the RTGS business hours.

The RTGS system is primarily meant for large value financial transactions. The minimum amount to be remitted under RTGS system is Rupees two lakh and no upper ceiling for amount that could be transferred. In normal circumstances the beneficiary branches have to credit the beneficiary’s account within two hours of receiving the funds transfer message.  If the money cannot be credited for any reasons such as the name of the beneficiary or account number mentioned in the RTGS message is different, the receiving bank will return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer’s account is reversed. Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable. The RTGS service window for customer’s transactions is available from 9.00 hours to 16.30 hours  including working Saturdays. The cut-off for Inter bank transaction (Final cut-off) at 19.45 hours.IDL reversal takes place between 19.45 hours to 20 hours. Day ends for RTGS at 20.00 hours.However, the timings that the banks follow may vary depending on the customer timings of the bank branches. The Future Value dated Transaction of RTGS would enable the customers / participants to initiate RTGS transactions 3 working days in advance for settling in RTGS on value date

Meaning of NEFT transactions

NEFT stands acronym for National Electronic Fund Transfer. NEFT operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. At present, NEFT operates in hourly batches will be between 8 am to 7 pm with twenty three hourly settlements (like 8.30 am,9.30 am 10.30 and so on up to 6.30 pm). In NEFT the settlement takes place with all transactions received till the particular cut-off time. All individuals, firms and corporates can electronically transfer their funds to any individuals, firms or corporates having an account with any other bank branch in the country participating in the Scheme. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. There is no restriction or limit on the amount of funds that could be transferred using NEFT. However, maximum amount per transaction is limited to Rs.50, 000/- for cash-based remittances and remittances to Nepal.

Meaning of IFSC:

IFSC stands for short form of for Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the Electronic Funds Transfer (NEFT/RTGS) systems. Alpha-numeric code is an 11 digit code with the first 4 alpha characters representing the bank, and the last 6 characters representing the branch. The 5th character is 0 (zero). IFSC is used by the NEFT & RTGS systems to identify the originating / destination banks / branches and also to route the messages appropriately to the concerned banks / branches.

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