RTGS-NEFT MEANING CHARGES TIMING LIMIT ADVANTAGES PROCESS

In the fast-paced world of finance, the seamless and instantaneous transfer of funds is essential for businesses and individuals alike. Elec...

In the fast-paced world of finance, the seamless and instantaneous transfer of funds is essential for businesses and individuals alike. Electronic Fund Transfers (EFTs) have emerged as a cornerstone in facilitating these transactions. Two widely used EFT systems are Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT). This blog post aims to unravel the complexities surrounding RTGS and NEFT, offering readers a comprehensive understanding of these electronic payment systems.

Understanding RTGS

Real-Time Gross Settlement (RTGS) is a high-speed electronic fund transfer system where transactions are processed instantly, on a gross basis. This means that each transaction is settled individually without netting with any other transaction. RTGS is specifically designed for high-value transactions, providing real-time settlement and reducing credit risk.

How RTGS Works

In the RTGS system, participant banks communicate directly with the central bank or a designated clearinghouse. When a customer initiates a transaction, the participating banks verify the availability of funds in the sender's account and transmit the transaction details to the central system. The central system then processes the transaction in real-time, transferring funds from the sender's account to the recipient's account instantly.

RTGS Charges

As of July 01, 2019, the Reserve Bank of India (RBI) has implemented changes regarding the processing charges for Real-Time Gross Settlement (RTGS) transactions. In a move aimed at promoting digital transactions and reducing financial burdens on users, the RBI has decided to waive the processing charges it previously imposed on RTGS transactions. This waiver applies to transactions conducted through the RTGS system, and banks are encouraged to pass on this benefit to their customers.

To standardize and rationalize service charges associated with funds transfer through the RTGS system, the RBI has established a comprehensive framework for charges. This framework delineates charges for both inward and outward transactions, providing clarity on the cost structure.

For inward transactions, no charges are to be levied. This means that recipients of funds through RTGS will not incur any fees for the transaction.

For outward transactions, the charges are structured as follows:

a) Transactions ranging from ₹2,00,000/- to 5,00,000/-: The charge should not exceed ₹25/-, exclusive of any applicable taxes.

b) Transactions exceeding ₹5,00,000/-: The charge should not exceed ₹50, exclusive of any applicable taxes.

It is important to note that while these charges provide a broad framework, individual banks have the flexibility to decide on their fee structure within these limits. Banks may choose to charge a lower rate than the prescribed maximum, but they are not permitted to charge more than the rates set by the RBI. This allows for a degree of flexibility for banks while ensuring that customers are not subjected to exorbitant charges for RTGS transactions.

Transaction Type	RTGS Charges	NEFT Charges
Inward Transactions	Free	Free
Outward Transactions
Up to ₹2,00,000	NA	Charges vary, typically nominal
₹2,00,001 - ₹5,00,000	Not exceeding ₹25 (exclusive of tax)
Above ₹5,00,000	Not exceeding ₹50 (exclusive of tax)	na

Note: The above charges are indicative and based on the guidelines as of October 31, 2022. Banks may choose to charge lower rates, but they cannot exceed the maximum rates prescribed by the Reserve Bank of India (RBI).

When targeting the USA market in your blog, it's essential to emphasize that these charges are specific to transactions in India, and international transactions may have different fee structures. Users are advised to check with their respective banks or financial institutions for the most accurate and up-to-date information regarding RTGS and NEFT charges, especially when dealing with cross-border transactions.

In summary, the RBI's decision to waive its processing charges for RTGS transactions, coupled with the prescribed framework for service charges, aims to make electronic funds transfers more cost-effective and user-friendly. The guidelines provide a transparent structure for charges, promoting consistency and fairness in the application of fees associated with RTGS transactions.

Advantages of RTGS

RTGS offers several advantages, including instant fund transfers, reduced credit risk, and increased transparency. The real-time nature of RTGS ensures that funds are available to the recipient immediately, contributing to faster and more efficient financial transactions. Additionally, the gross settlement mechanism minimizes the risk associated with delayed or failed settlements.

Limit: The RTGS system is primarily meant for large-value transactions. The minimum amount to be remitted through RTGS is ₹ 2,00,000/- with no upper or maximum ceiling.

Real-Time Gross Settlement System (RTGS) - Updated FAQ 

1. What does RTGS stand for?

   The acronym 'RTGS' stands for Real-Time Gross Settlement. It refers to a system where there is continuous and real-time settlement of fund transfers, individually on a transaction-by-transaction basis (without netting). 'Real Time' implies processing instructions at the time of receipt, and 'Gross Settlement' means settlement of funds transfer instructions occurs individually.

2. **Are the payments under RTGS final and irrevocable?**

   Yes, since the funds settlement occurs in the books of the Reserve Bank of India (RBI), payments made through RTGS are final and irrevocable.

3. **What are the benefits of using RTGS?**

   RTGS offers various advantages:

   - Safe and secure fund transfer system.

   - No amount cap set by RBI for transactions.

   - Available 24x7x365, ensuring real-time fund transfers.

   - Eliminates the need for physical cheques or demand drafts.

   - Transactions can be initiated through internet banking.

   - Transaction charges are capped by RBI.

   - Legal backing for transactions.

4. How is the processing of RTGS different from that of the National Electronic Funds Transfer (NEFT) System?

   In RTGS, transactions are processed continuously on a transaction-by-transaction basis throughout the day, while NEFT processes transactions in batches.

5. Is RTGS a 24x7 system, or are there some timings applicable?

   RTGS is available 24x7x365 since December 14, 2020.

6. Is there any minimum/maximum amount stipulation for RTGS transactions?

   The RTGS system is primarily meant for large-value transactions. The minimum amount for remittance through RTGS is ₹2,00,000/- with no upper or maximum ceiling.

7. What about processing charges/service charges for RTGS transactions?

   As of July 01, 2019, RBI has waived the processing charges for RTGS transactions. A framework of charges for banks includes no charges for inward transactions and capped charges for outward transactions based on transaction amounts.

   - Inward transactions – Free, no charge to be levied.

   - Outward transactions – ₹2,00,000/- to 5,00,000/-: not exceeding ₹25/- (exclusive of tax, if any)

   - Above ₹5,00,000/-: not exceeding ₹50 (exclusive of tax, if any)

   Banks may charge a lower rate but cannot exceed the rates prescribed by RBI.

8. What is the essential information that the remitting customer needs to furnish for making a remittance?

   The remitting customer must provide:

   - Amount to be remitted

   - Account number to be debited

   - Name of the beneficiary bank and branch

   - IFSC number of the receiving branch

   - Name and account number of the beneficiary customer

   - Sender to receiver information, if any

   - Sender and Beneficiary Legal Entity Identifier (for eligible transactions)

9. How would one know the IFSC number of the receiving branch?

   The remitter can obtain the IFSC number from their bank branch or from the cheque leaf of the beneficiary. The list of IFSCs is also available on the RBI website and is updated regularly.

10. Do all bank branches in India provide RTGS service? How can a remitting customer know whether the bank branch of the beneficiary accepts remittance through RTGS?

    For an RTGS transaction, both the sending and receiving bank branches need to be RTGS enabled. The list of RTGS-enabled bank branches is available on the RBI website and is updated regularly.

11. What care should be taken while originating an RTGS transaction?

    While putting through an RTGS transaction, ensure that:

    - Originating and destination bank branches are part of the RTGS network.

    - Beneficiary details are accurate, including name, account number, and IFSC of the beneficiary bank branch.

12. In RTGS, why is credit to the beneficiary given solely based on account number?

    Transactions in RTGS happen in real-time, making it impractical to match names and account numbers before affording credit to the beneficiary. Credit is given solely based on the account number to ensure swift processing.

13. **What is the time taken for effecting funds transfer from one account to another through RTGS?**

    Under normal circumstances, the beneficiary branches are expected to receive the funds in real-time, with the beneficiary bank crediting the account within 30 minutes of receiving the funds transfer message.

14. Can a remitting customer initiate a transaction for a future date?

    No, the RTGS system does not accept future value-dated transactions.

15. Can a transaction be originated to draw (receive) funds from another account?

    No, RTGS is a credit-push system, allowing transactions to be originated only by the payer/remitter/sender to transfer funds to a beneficiary.

16. Can an RTGS transaction be tracked? Would the remitting customer receive an acknowledgment of money credited to the beneficiary's account?

    While customers do not have the facility to track the transaction, the RBI has implemented positive confirmation in an RTGS transaction. The remitting bank receives a message from RBI (through the beneficiary bank) confirming that the money has been credited to the beneficiary's account.

17. **Would the remitting customer get back the money if it is not credited to the beneficiary's account? Is there any time frame prescribed for it?**

    Yes, if it is not possible to credit the funds to the beneficiary customer’s account, the funds received by the RTGS member bank will be returned to the originating bank within one hour of receipt or before the end of the RTGS Business Day, whichever is earlier.

18. Is a customer eligible to get compensation for delay in returning the payment?

    In case of any delay in returning the failed payment, the originating customer is eligible to receive compensation at the current repo rate plus 2%.

19. Whom can a customer contact, in case of non-credit or delay in credit to the beneficiary account?

    The customer can contact their bank/branch. The details of Customer Facilitation Centre of member banks are also available on the RBI website.

20. What is UTR number?

    Unique Transaction Reference (UTR) number is a 22-character code used to uniquely identify a transaction in RTGS system.

21. What is the Help Desk/Contact point at the RBI?

    The RTGS Help Desk/Contact point of the RBI can be reached at rtgsmumbai@rbi.org.in.

22. Whom should I approach for raising a dispute/complaint related to RTGS transaction?

    Customers can approach the grievance redressal cell of their bank with details of the disputed transaction. If the grievance is not resolved within 30 days, a complaint can be made under “The Reserve Bank-Integrated Ombudsman Scheme (RB-IOS 2021).”

23. How can I file a complaint under the RB-IOS 2021?

    Complaints can be filed online on https://cms.rbi.org.in, through dedicated e-mail, or sent in physical mode

Decoding NEFT

National Electronic Funds Transfer (NEFT) is another popular EFT system that operates on a deferred net settlement basis. NEFT processes transactions in batches, with settlements occurring at predetermined intervals. This system is more suitable for small to medium-value transactions.

How NEFT Works

NEFT involves participant banks and branches that send transaction requests to a central clearinghouse. These requests are collected and processed in batches at specific intervals throughout the day. The net settlement amount is then transferred between the participant banks, and individual transactions are settled accordingly.

Advantages of NEFT

NEFT offers cost-effective solutions for fund transfers and is widely accessible to both individuals and businesses. With lower operational costs compared to RTGS, NEFT is an attractive option for those looking to make medium to small-value transactions. The system is available during extended operating hours, enhancing its accessibility.

Limitations and Challenges

One of the primary limitations of NEFT is the time delay in processing transactions. Since settlements occur in batches, there may be a delay before funds are credited to the recipient's account. Additionally, NEFT operates within specific hours, which may pose a challenge for users requiring immediate fund transfers outside these periods.

A Comparative Analysis

To better understand the distinctions between RTGS and NEFT, let's explore a comparative analysis based on processing speed, transaction limits, applicability for different transaction sizes, operational hours, and cost implications.

Processing Speed

RTGS provides instant fund transfers, making it ideal for time-sensitive transactions. In contrast, NEFT involves batch processing, leading to delays in fund transfers.

Transaction Limits

RTGS is typically used for high-value transactions due to its real-time gross settlement mechanism. NEFT, on the other hand, is more suitable for small to medium-value transactions.

Applicability for Different Transaction Sizes

RTGS is preferred for large transactions where immediate settlement is crucial. NEFT caters to a broader range of transaction sizes, making it suitable for various financial needs.

Operational Hours

RTGS is available 24x7x365 with effect from December 14, 2020., while NEFT often operates during extended hours, providing flexibility for users.

Cost Implications

RTGS transactions usually involve higher costs due to the real-time processing infrastructure. NEFT, being a batch processing system, is more cost-effective for smaller transactions.

Choosing the Right System for Your Needs

Selecting between RTGS and NEFT depends on various factors such as transaction urgency, value, and cost considerations. For high-value, time-sensitive transactions, RTGS is the preferred choice. NEFT is a more versatile option for users with lower-value transactions and flexible timelines.

Recent Developments and Innovations

As technology continues to evolve, electronic fund transfer systems are undergoing significant advancements. Regulatory changes and innovations in payment technologies are shaping the landscape of RTGS and NEFT. Financial institutions are exploring ways to enhance the efficiency, security, and accessibility of these systems.

Security and Risk Management

Ensuring the security of electronic fund transfers is paramount. Both RTGS and NEFT adhere to stringent security measures and regulatory frameworks. Risk mitigation strategies, including encryption protocols and transaction monitoring, are implemented to safeguard against fraud and unauthorized activities.

NEFT FAQ

The document provides comprehensive information about the National Electronic Funds Transfer (NEFT) system in India as of October 31, 2022. Here are the key points and answers to the questions:

1. NEFT System Overview:

   - NEFT is a centralized payment system owned and operated by the Reserve Bank of India (RBI).

   - Procedures for various stakeholders are available on the RBI website.

2. Advantages of NEFT:

   - 24/7 availability.

   - Near-real-time and secure funds transfer.

   - Pan-India coverage through a vast network of bank branches.

   - Convenience of initiating transactions online.

   - Positive confirmation via SMS/email.

   - Penal interest for delayed transactions.

   - No charges by RBI; capped transaction charges.

   - Legal backing for transactions.

3. NEFT Operation:

   - Initiator (remitter) can use internet/mobile banking or visit a bank branch.

   - Originating bank sends a message to its pooling center.

   - Message forwarded to the NEFT Clearing Centre operated by RBI.

   - Clearing Centre sorts transactions and forwards remittance messages to beneficiary banks.

   - Beneficiary banks credit the funds to the respective accounts.

4. Indian Financial System Code (IFSC):

   - 11-digit alphanumeric code uniquely identifying bank branches participating in NEFT.

   - Used for routing messages and identifying banks/branches.

5. Finding IFSC:

   - List of IFSCs available on the RBI website and advised to be printed on cheques.

6. Eligibility for NEFT:

   - Individuals, firms, and corporates with accounts in NEFT member banks can use the system.

7. Funds Limit:

   - No RBI-imposed limit, but banks may have their own risk-based limits.

8. NEFT for Non-Account Holders:

   - Individuals without a bank account can remit cash, limited to ₹50,000 per transaction.

9. NEFT for International Remittances:

   - Outbound remittances allowed to Nepal under the Indo-Nepal Remittance Facility (INRF) Scheme.

10. NEFT Operating Hours:

    - Available 24/7 on a 24x7x365 basis, operating in batches at half-hourly intervals.

11. Essential Details for NEFT:

    - Beneficiary's name, branch name, bank name, account type, account number, branch IFSC, sender, and beneficiary Legal Entity Identifier.

12. Customer Charges:

    - No charges for inward transactions.

    - RBI stopped processing charges from July 01, 2019.

    - No charges for online NEFT funds transfers from savings accounts from January 01, 2020.

    - Capped charges for other outward transactions.

13. NEFT for NRE/NRO Accounts:

    - NEFT can be used for transfers to/from NRE and NRO accounts, subject to FEMA and Wire Transfer Guidelines.

14. Originating NEFT Transactions:

    - NEFT is a credit-push system; only the payer can originate transactions.

15. Tracking NEFT Transactions:

    - Remitter and beneficiary can track the transaction through NEFT Customer Facilitation Centres (CFCs).

16. Details of Source in NEFT Transactions:

    - Remitter's name is printed in the beneficiary's account statement/passbook.

    - An optional field allows additional sender-to-receiver information.

17. RBI Help Desk:

    - NEFT Help Desk/Contact point at RBI: nefthelpdeskncc@rbi.org.in.

18. Receipt Time for Beneficiary:

    - Beneficiary's account should be credited within two hours from batch settlement.

19. Non-Credit of Funds:

    - If not credited, destination banks must return the transaction within two hours.

20. Penalties for Delay:

    - Banks are liable to pay penal interest if the transaction is not credited or returned within two hours.

21. Wrong Account Number:

    - Credit is based on the account number provided by the remitter; the responsibility lies with the sender.

22. Dispute Resolution:

    - Disputes can be raised with the grievance redressal cell of the bank; if unresolved, complaints can be made under the RB-IOS 2021.

23. Filing Complaints Under RB-IOS 2021:

    - Complaints can be filed online, via email, or in physical mode as per the RB-IOS 2021.

24. Safe Digital Payments:

    - RBI provides information on safe and secure digital payments on its website.

25. Legal Entity Identifier (LEI):

    - LEI is relevant for large-value NEFT transactions; FAQs are available on the RBI website.

This comprehensive FAQ provides detailed information about NEFT operations, benefits, procedures, and customer guidelines. Users are directed to refer to the RBI website for the most up-to-date information.

Conclusion

In conclusion, RTGS and NEFT play pivotal roles in the modern financial landscape, enabling seamless electronic fund transfers. Each system has its unique features, advantages, and limitations. Understanding the intricacies of RTGS and NEFT empowers users to make informed decisions based on their specific financial needs. As technology continues to evolve, these electronic payment systems will likely undergo further enhancements, contributing to a more efficient and secure financial ecosystem.