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Settlement Systems of India – NEFT and RTGS Research Team | Posted On Tuesday, June 11,2019, 03:31 PM

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Settlement Systems of India – NEFT and RTGS



Electronic payment systems in India help people transfer funds quickly from their bank account to some other account, electronically. Money transfer has become really easy with technology assisting smooth online fund transfer. These systems are preferred by individuals and businesses that do not have to go through the hassles of visiting the bank branch physically and standing in queues to enable the transfer of funds.

In India the two main electronic fund settlement systems for one-to-one transactions are:

  • National Electronic Funds Transfer(NEFT)
  • Real-Time Gross Settlement (RTGS)

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Settlement Systems of India – NEFT and RTGS


NEFT is a payment system that makes the transfer of funds easy and fast. With NEFT, you can now transfer funds electronically, helping transfer large amounts from one account to another, thereby reducing cash dealings and transactions. NEFT is operated and managed by national clearing cell, reserve bank of India.

This system of fund transfer was introduced in the year 2005. The system enables individuals settle one-to-one transfers and can be used by both corporates and individuals. This system can be used by firms or individuals to electronically settle payments. However, both parties must have bank accounts that are NEFT-enabled.

See Also: Basics of Financial Planning

How Does It Work?

Unlike other payment systems that work based on real-time settlement, NEFT transactions do not take place real-time. The transactions taking place through NEFT are cleared on a half-hourly basis. The bank executive generally collects all the transactions received within half an hour and clears the transactions through the process of netting. NEFT transactions take place on net-basis. Currently, there are 23 half-hourly settlement batches being operated from 8 A.M to 7 P.M. and the facility is available on all working days including working Saturdays.

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Benefits of NEFT:

  • Minimizes transactions through cheques or demand draft.
  • As NEFT operates electronically, the chances of theft or loss are negligible.
  • NEFT transactions reduce paperwork.
  • A Cost-effective and quick method of transferring funds.
  • Transactions can be made via net banking or mobile banking. The funds can be transferred from home or workplace as per the convenience of the user.

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Transaction costs on NEFT:

There is no cost for inward remittance. The Cost must be borne only for outward transactions:

  • For transactions up to Rs 10,000, the charges are Rs 2.5 along with service tax.
  • For transactions from Rs 10,000 to Rs 1 Lakh charges are Rs 5 along with service tax.
  • For transactions from Rs 1 Lakh to Rs 2 Lakh, charges are Rs 15 along with service tax.
  • For transactions above Rs 2 Lakh, charges are Rs 25 along with service tax.


RTGS is an alternative form of electronic fund transfer which enables businesses, corporates, firms and individuals settle one-to-one transactions. The funds are transferred immediately real–time without any delay, unlike NEFT. In India, RTGS is used for money transfer of higher denominations, the minimum being Rs 2 Lakh. It is a quick and secure way of transferring funds and settling payments online.

How Does It Work?

Using RTGS you can transfer funds from the bank account to the beneficiary located within India on an immediate basis. You only have to add the account details of the payee and funds are transferred instantly, without any hassles. RTGS facilitates high-value transactions with a minimum cap of Rs 2 Lakh. Almost all commercial banks offer the facility of RTGS services through net banking websites and mobile banking apps. However, the payer must be very careful while transferring funds through RTGS as the payments are final and irrevocable.

Benefits of RTGS:

  • In the past, transactions of higher amounts were only done via demand draft or cheque. Now, transactions can be done electronically and real-time.
  • RTGS reduces the chances of money being stolen, unlike cheques and demand drafts which can be misplaced or stolen.
  • Helps businesses run smoothly by transferring a huge sum of money and settling large payments immediately.
  • Lesser chances of counterparty default and reduced delay in payment.

See Also: Importance of Financial Planning

Transaction Costs:

There is no cost for inward remittances on RTGS. However, for outward transactions:

  • For transactions of Rs 2 Lakhs to 5 Lakhs the charges are Rs 30 per transaction.
  • For transactions above Rs 5 Lakh, the charges are Rs 55 a transaction.

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