Know The Basic Difference Between A NEFT And A RTGS Transfer

Posted onDec 16, 2021

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Inter-bank transfer is a special service that allows an individual to transfer funds electronically to accounts in other banks in India mainly through the following two modes:

  1. NEFT
  2. RTGS

Apart from the two online transfers mentioned, here in India, we have yet another name that is popular in the banking sector, it is the  IMPS (Immediate Payment Services). Yes, all of these are electronic payment systems that allow you to transfer funds from one bank to another within the country.

NEFT and RTGS remain extremely popular, especially among business owners who need to make large amounts of transactions. All customers having savings accounts and current accounts are eligible to use NEFT and RTGS services for the transfer of money.

Understanding the NEFT form of payments

Firstly, NEFT is a 24*7 available service of funds transfer wherein the transaction gets processed in batches every half an hour.

The RBI has never specified any limit be it minimum or maximum for transfer amounts. All the customer must do is provide details of the beneficiary to initiate an NEFT transfer. Now, coming to the main agenda, the details required for a typical NEFT transfer are the name of the beneficiary, account number and account type, name of the bank, and the Indian Financial System Code (IFSC) of the bank.

Understanding the RTGS form of payments

RTGS is basically a funds transfer system based on a gross settlement concept. Here, money is moved from one bank to another in real-time and is primarily designed for high transaction amounts only. 

One must know, that the minimum transfer amounts begin from INR 2 lakhs for a single transfer. RTGS is of great help when the transaction amounts are high and these payments need to be processed immediately for the customer.

The important details that need to be entered for a typical RTGS transfer are the name of the beneficiary, account number and account type, name of the bank, and the Indian Financial System Code (IFSC) of the bank.

Operational differences between RTGS and NEFT transfers

The fundamental difference between RTGS and NEFT is that while RTGS is based on gross settlement NEFT, on the other hand, is based on net settlement. Gross settlement is where a transaction is completed on a one-to-one basis without bunching with other transactions. 

Now, moving on towards another important point, a Deferred Net Basis (DNS), or net settlement means that the transactions are completed in batches at specific times. Here, all transfers will be held up until a specific time. 

RTGS transactions are processed throughout the working hours of the system. RTGS transactions involve large amounts of cash, basically, only funds above Rs. 2 lacs may be transferred using this system by the customers. For NEFT transfers, any amount below Rs.  2 lacs may be transferred and this form of payment method is generally for smaller value transactions involving smaller amounts of money. RTGS processes can be treated as real-time transfers, while NEFT transfers are processed in cycles during any given working day.

So, if you want to transfer large sums of money real-time RTGS is better but for small amounts where there is not much urgency, NEFT is a better option to choose. Hope you now know the difference between NEFT and RTGS and also know how an RTGS is done and how an NEFT is done.


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