RTGS vs. NEFT

Difference Between RTGS and NEFT

Being an Indian, all of us know how painful it was to send money to another account in India earlier. Today technologies like RTGS and NEFT have made the transfer fast, easy and simple. Although both are electronic fund transfers, there are some differences between these two modes which we will discuss in this article.

RTGS stands for Real Time Gross Settlement and indeed a method of transferring funds electronically between two very popular and two different banks or branches of a bank on the simple and real-time gross basis. NEFT is the Electronic Funds Transfer of and is somewhat similar to RTGS as an online system to transfer funds between banks.

The major differences between RTGS and NEFT are that RTGS is the real-time settlement, while NEFT is a net settlement process. As RTGS is done in real time, considering also that RTGS is a transfer of funds by the fastest banking channels. Contrastingly, NEFT is much slower when compared to RTGS. The net settlement transactions installs in batches whereas the RTGS is faster. All transactions are held until that time. If NEFT, settlement occurs six times in one day starting from 9:30 in the morning until 16:00 in the afternoon. The transaction that has been started from the appointed time has to wait for the next scheduled settlement time. On the contrary, in the case of RTGS, transactions are settled as soon as they are processed by returning bank and they are passed on to a database so that there is no other transaction clustering and justify the label gross settlement.

The important difference between the RTGS and NEFT is the minimal amount of money that can be transferred by these modes of transfer of funds. RTGS can be used to transfer any amount which is any amount lower to two lakh rupees. However, there is no upper limit in RTGS. NEFT is used in case of transactions that are of smaller amounts and RTGS cannot be used, if less than Rs 2 lakh rupees is being send to another party in India. Yet, amazingly, we can send amounts higher than Rs 2 lakh per NEFT if someone wishes to do so.

In RTGS, the beneficiary’s account is credited within 2 hours of receipt of funds transfer message. This means that the RTGS transfers occurs on the same day, while it is possible to transfer funds in the beneficiary account on the next day through NEFT.

Despite their differences, both RTGS and NEFT are used in all parts of the country for the electronic transfer of funds due to absolute advantage, efficiency and faster transfers modes.

 

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