What is the difference between NEFT and RTGS?

National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme, one can electronically transfer funds from any bank branch to any other bank branch in the country participating in the Scheme. Both account holders and walk-in customers (those without a bank account) can transfer funds/cash using NEFT. However, cash remittances will be restricted to a maximum of Rs.50,000/- per transaction.

From Dec 2019, NEFT operates 24 X 7 X 365 in 48 half-hourly batches everyday (including all holidays). Early, NEFT was restricted to hourly batches, aligned to bank timings i.e. holidays on Sunday and 2^nd & 4^th Saturdays. Also, NEFT charges for savings bank account holders have been done away with as of date.

Real Time Gross Settlement systems (RTGS) are funds transfer systems where transfer of money or securities takes place from one bank to another on a ‘real time’ and on ‘gross’ basis.

• ‘Real time’ settlement means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed.
• ‘Gross settlement’ means the transaction is settled on one to one basis without bunching or netting with any other transaction.

Once processed, payments are final and irrevocable.

Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary's account within two hours of receiving the funds transfer message.

The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is Rs.2 lakh, while there is no upper ceiling for RTGS transactions.

How is RTGS different from NEFT?

1. NEFT operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches, with all transactions received till the particular cut-off time being clubbed together. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, NEFT operates in half-hourly batches and  transactions initiated after a designated settlement time would have to wait till the next designated settlement time. Contrary to this, RTGS transactions are processed continuously throughout the RTGS business hours.
2. Minimum limit of Rs. 2 lakh for RTGS. No such limit for NEFT transactions.