What are the Major Differences Between NEFT and RTGS?

Today, electronic payment systems such as NEFT (National Electronic Funds Transfer) and RTGS (Real Time Gross Settlements) have become mainstream. These are, moreover, RBI-approved integral payment systems for small to large financial transactions.

Even though both of these methods are widely accepted across the country there is still a lack of awareness amongst many users on this subject such as around the functioning of the payment systems, the fees associated with these, and the time frame in which either of these works.

Differences between NEFT and RTGS

The main difference between NEFT and RTGS lies in settlement time and transaction limit.

• NEFT operates in batches, causing slight delays, while RTGS ensures real-time settlements.
• NEFT operates 24x7, while RTGS operates within working hours, considering bank holidays and work hours to avoid delays.
• RTGS has a minimum transaction threshold, unlike NEFT.

Introduction to NEFT and RTGS

NEFT and RTGS, regulated by the Reserve Bank of India, transform fund transfers with secure digital networks. By understanding the differences between NEFT and RTGS, individuals can make better decisions for large fund transfers or settlements. This blog covers the basics and advanced aspects of NEFT and RTGS, offering key insights into these payment methods.

Transaction Speed and Timing

When it comes to money transfers, transaction speed and timing are very important. These become even more important for urgent payouts. Below is how both NEFT and RTGS differ in terms of their transaction speed and timings:

NEFT (National Electronic Funds Transfer):

• Typically takes 2 hours to process a payment.
• Processes bulk payments in batches, which are aggregated transactions for batch settlements.
• Ensures safe and secure payments.
• Each batch has a specific call timing associated with it.

RTGS (Real Time Gross Settlement):

• Facilitates instant payments.
• Ideal for urgent payouts, with beneficiaries receiving payments within minutes.
• Swift payment method ensuring timely payouts and transparency.
• Provides instant confirmation message upon completion, usually received in under 30 minutes.

Transaction Limits

Understanding these differences allows you to make more informed choices regarding your transfers.

NEFT (National Electronic Funds Transfer):

• Allows both small and large payments.
• Minimum amount for payment: Rs.1/-.
• The maximum limit varies across banks; however, there may be a maximum cap in some countries.
• In India, there is no maximum limit for NEFT through bank transfer; however, for cash-based remittances, the maximum limit is Rs. 50,000/-.

RTGS (Real Time Gross Settlement):

• Primarily for large payments.
• Minimum amount for transfer: Rs. 2,00,000/- (two lakhs).
• Maximum limit varies among banks; no upper limit is set by the RBI.
• No transaction charges for RTGS transfers initiated through the online mode.

Fees and Charges

While considering NEFT and RTGS for making any financial payouts, it is important to understand their respective fees. Let us understand the breakdown of these charges.

Understanding NEFT Fees

• Some banks offer NEFT services for free, while others may incur a nominal service fee.
• Fees depend on the transaction amount and bank policies.
• Large payments may be free, while smaller transactions might incur a charge.
• Fixed minimum fees may apply in some cases.
• NEFTs via mobile or internet banking are usually free, but bank-branch transfers may have fixed fees.

RTGS Fees Breakdown

• RTGS generally involves higher fees due to its real-time, instant settlement nature.
• Fees vary based on transaction amount and account type (savings or current).
• Different fees may apply for online versus offline transactions.
• Checking your bank's policies for NEFT and RTGS fee charges is recommended. Understanding these fees will help you make more informed decisions.

It's advisable to check your bank's policies for NEFT and RTGS fees to understand them and make informed decisions.

Availability and Accessibility

You need to acknowledge the availability before making any payment through these methods. There is a general diff between NEFT and RTGS payment methods. In case you are making an urgent payment, you must consider which of these are available across the day/night, and which remains non-functional on public holidays and non-working hours.

NEFT Availability

• 24/7 Operation: NEFT is available round the clock throughout the year, providing continuous access to funds transfer.
• Batch Processing: Transactions are processed in half-hourly intervals throughout the day, ensuring timely settlement.
• Automated Processing: In case of any non-availability, the Reserve Bank of India (RBI) will broadcast a message to all system participants.

RTGS Availability

• Operating Hours: RTGS operates on all working days of the RBI, from 7:00 AM to 6:00 PM, ensuring availability during regular banking hours.
• Immediate Settlement: Transactions are settled individually and immediately, providing instant fund transfer.
• High-Value Transactions: RTGS is mainly used for high-value transactions due to its immediate and secure processing.

Making Payments Outside Regular Hours

• NEFT: Payments can be made through NEFT at any time, as it operates round the clock, allowing for payments outside regular banking hours.
• RTGS: RTGS is limited to regular banking hours and does not offer fund transfers outside these hours.

Security and Reliability

The primary difference between NEFT and RTGS lies in their security and reliability for users. Both are government-approved electronic payment systems, ensuring trust, security, and reliability for users. Here are some ways NEFT and RTGS maintain trust.

NEFT Transaction Security

• NEFT transactions are processed through a secure digital network maintained by the Reserve Bank of India (RBI).
• This ensures high levels of trust, encryption, and security.
• Authentication protocols are employed to safeguard sensitive personal finance information.
• There are minimal chances of unauthorised access or tampering with the transaction process.
• Settlement processes involve multi-layer verification and reconciliation, minimising discrepancies.

RTGS Transaction Security

• RTGS provides real-time settlements and is also governed by the RBI.
• Payments are processed through a secure network infrastructure with advanced security measures.
• Measures include encryption, digital signatures, and SSL (Secure Socket Layers) technology.
• These technologies minimise the risk of security breaches.
• RTGS transactions are subject to regulatory oversight and compliance requirements.

Conclusion

Both payment methods are useful as per your specific requirements. We have categorised the major differences between NEFT and RTGS that as a user, you should know.

By following the above-mentioned information, you can choose a secure and safe payment method for yourself. NEFT and RTGS are both approved by the RBI and regulated for compliance. It is good to know about these before making a transaction. Understanding these financial terms is essential and basic, similar to ensuring you and your assets are secured for any unexpected event. Consider Royal Sundaram insurance products to safeguard you and your life.