Electronic transfer of money is growing rapidly due to its speed, safety, simplicity, and ease with the progress of technology. Funds can be electronically transmitted from one bank account to another. In addition, the process allows immediate updates to the status of the account and transaction. The two electronic mediums which transfer funds in India are NEFT and RTGS. These methods eliminate the need to visit a bank and can be accessed through online mode.
NEFT vs RTGS
The main difference between NEFT and RTGS lies in their basis of settlement. RTGS transactions operate in real-time, and hence it is faster than NEFT. NEFT has its advantages. NEFT allows lower-value transactions and is processed on all days, whereas RTGS transactions are processed on specific days and timings.
Neft, also known as National Electronic Fund Transfer, is an online payment system. It lets the users transfer funds from one bank account to another. It eliminates the need to visit banks to facilitate transfers. Neft is considered to be the most famous method to electronically transfer funds from one individual to another.
RTGS is also known as Real-Time Gross Settlement. It is an electronic system that enables the transfer of funds in real-time. It processes the transaction at the same time when a request is received. Making it quick and convenient. The transactions are processed in business days. The central bank is in charge of regulating all the RTGS transactions. So, RTGS transactions are recorded in the books of the Reserve bank of India.
Comparison Table Between NEFT and RTGS
| Parameters of Comparison | NEFT | RTGS |
| Function | NEFT is an electronic system that enables the transfer of small to large sums of money across India. | RTGS is an electronic system that allows the transfer of large sums of money in real-time. |
| Transfer limit | It requires a minimum transfer value of Rs 1. | It requires a minimum transfer value of Rs 2 lakh. |
| Speed | It can take up to around 12 hours to complete a transaction. | In Rtgs, transactions happen within seconds. It is considered the fastest mode of transferring funds. |
| Usage | It is used for small transactions. | It is used mainly for transactions that are of high value. |
| Introduction | It was introduced in November 2005. | It was introduced in March 2004. |
What is NEFT?
National Electronic Funds Transfer(NEFT) is an electronic system to facilitate the transfer of funds between two bank accounts. It was earlier used to operate for a fixed timing. But now, RBI has regulated the transfer of funds 24*7, even on public holidays. NEFT eases the transfer of funds without adding additional time and effort. The process involved in the Neft transaction are:
Step 1: Use your login ID and password to log in to your online bank account.
Step 2: Go to the Transfer Section of the NEFT Fund.
Step 3: Enter the recipient name, bank account, and IFSC code.
Step 4: Start an NEFT transfer after the beneficiary is successfully added. Enter the amount and send.
The only requirement is that the depositor and recipient bank accounts should support NEFT transfer. NEFT transfer can be made by an individual, a firm, or a company.
NEFT transactions offer several benefits. Some of them include
- Electronic transfer of funds, i.e., physical presence, is not required
- Simple and easy to use
- Quick and efficient as payment confirmation can be received through SMS or email within minimal time.
- Minimal to no chances of fraud as it is a highly secured method.
What is RTGS?
Real-Time Gross Settlement(RTGS) processes the transaction in real-time. Real-time means that the transfer of transactions will happen within no waiting time. Requirements of RTGS transactions:
- Bank account
- Minimum transaction limit of Rs 2 lakh
- Transactions should be processed within India
Transfer of funds through online mode requires no additional charges. RBI in July 2019 waived all the charges in RTGS transactions. RTGS transactions are considered to be fast as it happens on one to one basis. It is mainly done by corporations. The process involved in RTGS transaction through online mode:
Step 1: Log in to net banking
Step 2: Add details of the recipient account
Step 3: Go to the Transfer tab of RTGS Funds
Step 4: Choose the required amount to be transferred
Step 5: Accept the terms mentioned
Step 6: Send the online form for RTGS
Following the above-mentioned steps, it will enable the user to transfer funds hassle-free. RTGS transactions are managed by RBI, and hence once the transaction has been processed, it cannot be reversed.
Main Differences Between NEFT and RTGS
- NEFT works based on the DNS system, while RTGS works on gross settlement, i.e., one on one basis.
- Neft has no minimum or maximum limit. Though the upper limit should not exceed Rs 50,000 per transaction. Whereas RTGS has a minimum limit of Rs 2 lakh and no bounds on the upper limit.
- NEFT works best for smaller value transactions, while RTGS works best for high-value transactions.
- NEFT is slower than RTGS as NEFT transactions happen in hourly batches as opposed to real-time basis.
- NEFT transactions operate 24*7, even on holidays, whereas RTGS transactions operated only during working hours.
Conclusion
NEFT and RTGS offer transfers of funds through online mode. They make transfers of money quick and easy. NEFT has much broader benefits. It is not restricted to personal payments. Other payments like EMI’s personal loan, credit card payment could be processed through NEFT. Both the methods have their benefits and drawbacks.
There is no transaction fee involved in both payment methods. RTGS transactions are irrevocable. NEFT and RTGS methods are useful in today’s world, where people do not have enough time to pay a visit to banks. Though the transactions can be operated through both online and offline modes. They have proved to be an essential part of today’s digital world.
References
- https://www.emerald.com/insight/content/doi/10.1108/JMD-04-2017-0144/full/html
- https://www.indianjournals.com/ijor.aspx?target=ijor:jcmt&volume=7&issue=1&article=012