Tuesday, April 30, 2013

What is NEFT - National electronic fund transfer and RTGS - Real time gross settlement

India has two settlement systems named as NEFT and RTGS that is being used for the electronic fund transfer.

Transactions that are in bulk and repetitive in nature are being processed through the ECS stands for electronic clearing service.

ECS has two types named as ECS-Credit and ECS-Debit.

ECS-Credit is being used for the transactions that has one debit and multiple credits like- salary, dividend etc.

ECS-Debit is being used for the transactions that has one credit and multiple debits like- recurring bill payments, policy premiums etc.

RTGS - Real time gross settlement

This is a fund transfer mechanism where transfer of money takes place from one bank to another bank in real time.

In RTGS there is no waiting period, transaction is settled as soon as it's processed. As name includes the gross settlement, It means the transaction is settled by one to one basis without combining with any other transaction.

RTGS fees regulated by the respective banks but RBI has fixed the upper limit cap for the fees for removing the bank monopoly. For any RTGS transaction both sender and receiver banks should have Core Banking enabled.

As we know that Core Banking enabled banks and branches are assigned an IFSC code.This IFSC code is used for NEFT and RTGS transactions. IFSC stands for the Indian Financial System Code. IFSC code is 11-digit alphanumeric code ,Its First 4-character indicates the Bank and later 7-digits indicates the bank branch.

RBI has decided the minimum cap of 2 Lac rupees for RTGS transactions.

RTGS facility can be availed between 9 am to 4.30 pm in week-days and 9 am to 1.30 pm on saturdays.

NEFT - National electronic fund transfer

NEFT is a national electronic fund transfer system that can be used for the any electronic fund transfers. For NEFT a bank branch should be NEFT- enabled.

Currently, NEFT settlements operates in hourly batches. There are around 11 settlements starting from the 8 am and ends upto the 7 pm in week days and there are 5 settlements starting from the 8 am and ends upto the 1 pm on saturdays.

Any transaction started after the current settlement batch time need to wait upto the next settlement timing.

Note:- NEFT and RTGS does not processed on weekly holidays i.e. sunday and official public holidays declared by the RBI.

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