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Funds transfer: What you should know

October 07, 2009 12:44 IST
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Reserve Bank of India, the country's central bank has in place a number of facilities to help easy and effective transfer of funds to the banks across the nation. However, the RBI is also seen fine-tuning the banking system across the spectrum in tune with the changing times and demands, the NEFT and RTGS inter-bank payment systems for instance.

What are NEFT and RTGS?

NEFT is the acronym for National Electronic Fund Transfer. According to the RBI, this is an online system for transferring funds below Rs 1 lakh per transaction for the banks in the country. Here, the RBI acts as the service provider and transfers the credit from one bank to the other bank's account.

RTGS stands for Real Time Gross Settlement, an instant funds transfer system. The RBI has restricted the banks against using RTGS for amount below Rs 1 lakh. There is no upper ceiling for RTGS transactions.

Difference between NEFT and RTGS

The main differences between NEFT and RTGS are the time taken for transfer of funds and in the way it operates.

NEFT Transfer

In the case of NEFT transfer, under normal circumstances the funds from the remitting bank will be sent to the RBI within three hours of the transaction. However, the actual time taken to credit the beneficiary bank's branch account depends on the time taken by the beneficiary bank to process the payment. Also, the NEFT works on net settlement basis that is the amount is settled in batches and in different timings.

According to the RBI, NEFT settlement is carried out six times a day at 9.30 am, 10.30 am, 12 noon, 1 pm, 3 pm and 4 pm on weekdays and three times during Saturdays at 9.30 am, 10.30 am and 12 noon.

On the instructions of the RBI, banks providing T+0 and T+1 settlement systems offer NEFT for smaller transactions depending on the time of receiving the instruction from a customer for transferring the fund. That is, when a customer wants to transfer money to another bank through NEFT in the morning hours it would be done the same day. However, if the instructions are received later in the day, the money would be transferred only on the next day.

RTGS Transfer

Unlike NEFT, RTGS is instant that is it transfers money in real time and facilitates online transfer. Also, the RTGS works on gross settlement basis. According to experts, the RTGS system is the fastest possible inter-bank money transfer facility available today through secure banking channels in India. Under normal circumstances, the RTGS enables the beneficiary bank's branch to receive the funds in real time almost immediately after the funds are transferred by the remitting bank.

RTGS is accessible to the customers from 9 am to 3 pm on weekdays and 9 am to 12 noon on Saturdays. For inter-bank transactions it is open from 9 am to 5 pm on weekdays and from 9 am to 12 noon on Saturdays.

RTGS and NEFT facilities in banks

All commercial banks have RTGS facility whereas only 43 banks have software capabilities to support NEFT based transactions. RTGS is available in over 25,000 branches across the country, while the NEFT is available in about 37,000 branches.

RBI had ensured that all bank branches which are RTGS-enabled should also provide NEFT by December 2006. This follows the RBI's decision to scrap the Electronic Funds Transfer or EFT services due to non availability of the system in not more than 15 locations where the central bank has its clearing house.

Regarding the processing charges for all electronic payment products, the RBI has waived it till March 31, 2008. However, the levy of service charges by banks has been left to the discretion of the respective banks.

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