NEFT & RTGS

While doing online money transfer you must have heard the terms NFT and RTGS. Ever wondered what exactly these terms are and what’s the difference between them. If No then perhaps you should spend a few minutes to read below and hopefully your basic queries would be answered.

NEFT and RTGS are the two different means of transferring money between banks in India. Important thing to note here is that this is only for domestic transfers.

RTGS stands for Real Time Gross Settlement, it is a fund transfer mechanism which allows the money transfer between two banks on a ‘real time’ and on ‘gross’ basis. I will explain these terms a bit later.

NEFT stands for National Electronic Funds Transfer which is an online system for transferring funds between financial institutions. This is not done in real time but is done at predetermined fixed times.

The main difference between the 2 modes of transfer are listed below :

• The basic and most important difference between RTGS and NEFT is in their definitions itself. RTGS is based on gross settlement in real time while NEFT is based on bulk settlement at a predetermined time in future. In RTGS settlement is done in real time meaning immediately after processing of the remitting bank, while in NEFT the transfer is done in batches at specific times of the day. So NEFT is not based on individual transactions but rather is a bulk transaction between one bank to the other at a defined time of the day while RTGS is done based on individual transactions and in real time.  

• RTGS is the fastest money transfer system through the banking system as it is done in real time.

• Another major difference between the RTGS and NEFT is the amount which could be transferred. RTGS is a mechanism to transfer an amount of over  ` 2 lakhs ie the minimum amount to be remitted through RTGS is ` 2 lakhs. There is no upper limit for RTGS transactions. While  NEFT is used mainly to transfer funds below ` 2 lakhs, however, there is no maximum limit for transfers through NEFT.

So though NEFT and RTGS both are meant to perform the same function which is to transfer money. However the amount and the quickness differentiates them. Also the banks charges certain fees on both type of transactions. For international transfers each bank may have a different mode or vendor for transactions.