NEFT & RTGS

India has two main electronic funds settlement

systems for one to one transactions: the Real
Time Gross Settlement system (RTGS) and the
National Electronic Fund Transfer system (NEFT).
• The acronym 'RTGS' stands for Real Time Gross Settlement. The 
Reserve Bank of India (India's Central Bank) maintains this payment network.
RTGS system is a funds transfer mechanism where transfer of money takes place
from one bank to another on a 'real time' and on 'gross' basis. This is the fastest
possible money transfer system through the banking channel. Settlement in 'real
time' means payment transaction is not subjected to any waiting period. The
transactions are settled as soon as they are processed. 'Gross settlement' means
the transaction is settled on one to one basis without bunching with any other
transaction. Considering that money transfer takes place in the books of the
Reserve Bank of India, the payment is taken as final and irrevocable.

• National Electronic Fund Transfer (NEFT) is an online system for transferring

funds of Indian financial institution (especially banks).There is no minimum limit
for fund transfer in NEFT system.
NEFT
 What is NEFT?
National Electronic Funds Transfer (NEFT) is a nation-wide
system that facilitates individuals, firms and corporates to
electronically transfer funds from any bank branch to any
individual, firm or corporate having an account with any
other bank branch in the country.

Are all bank branches in the country part of the NEFT

funds transfer network?
For being part of the NEFT funds transfer network, a bank
branch has to be NEFT-enabled.

How can one know which bank branches are part of the

NEFT network?
The list of bank branches participating in the NEFT system
is available on the website of Reserve Bank of India at http
://www.rbi.org.in/scripts/neft.aspx. Details will also be
available with the banks / branches participating in the
NEFT system.
 Who can transfer funds using NEFT?
Individuals, firms or corporates maintaining
accounts with a bank branch can transfer funds
using NEFT. Even such individuals, firms or
corporates who do not have a bank account
(walk-in customers) can also deposit cash at
the NEFT-enabled branch with instructions to
transfer funds using NEFT. A separate
Transaction Code (No. 50) has been allotted in
the NEFT system to facilitate walk-in customers
to deposit cash and transfer funds to a
beneficiary. Such customers have to furnish full
details including complete address, telephone
number, etc. NEFT, thus, facilitates originators
or remitters to initiate funds transfer
transactions even without the need for having
a bank account.
 Who can receive funds through the NEFT
system?
Individuals, firms or corporates maintaining
accounts with a bank branch can receive funds
through the NEFT system. It is, therefore,
necessary for the beneficiary to have an
account with the NEFT enabled destination
bank branch in the country.
The NEFT system also facilitates one-
way cross-border transfer of funds from India
to Nepal. This is known as the Indo-Nepal
Remittance Facility Scheme. A remitter can
transfer funds from any of the NEFT-enabled
branches in to Nepal, irrespective of whether
the beneficiary in Nepal maintains an account
with a bank branch in Nepal or not. The
beneficiary would receive funds in Nepalese
Rupees. A separate Transaction Code (No. 51)
has been allotted in the NEFT system to
facilitate the transfer of funds from India to
Nepal.
 Whether the system is centre specific or has
any geographical restriction?
No. There is no restriction of centres or of any
geographical area within the country. The NEFT
system takes advantage of the centralised
accounting system in banks. For the purpose,
the account of a bank that is originating or
receiving funds transfer instructions through
NEFT is operated centrally at Mumbai. The
branches participating in NEFT can, however,
be located anywhere across the length and
breadth of the country.

What are the operating hours of NEFT?

Presently, NEFT operates in hourly batches -
there are eleven settlements from 9 am to 7
pm on week days and five settlements from 9
am to 1 pm on Saturdays.
How does the NEFT system operate?
Step-1 : An individual / firm / corporate
intending to originate  transfer of funds
through NEFT has to fill an application form
providing details of the beneficiary (like, name
of the beneficiary, name of the bank branch
where the beneficiary has an account, IFSC of
the beneficiary bank branch, account type and
account number). The application form will be
available at the originating bank branch. The
remitter authorizes his/her bank branch to
debit his account and remit the specified
amount to the beneficiary. Customers enjoying
net banking facility offered by their bankers
can initiate the funds transfer request online.
Some banks offer the NEFT facility even
through the ATMs. Walk-in customers will,
however, have to give their contact details
(complete address and telephone number,
etc.) to the branch. This will help the branch to
refund the money to the customer in case
credit could not be afforded to the
beneficiary’s bank account or the transaction is
rejected / returned for any reason.
Step-2 : The originating bank branch prepares
a message and sends the message to its
pooling centre (also called the NEFT Service
Centre).
Step-3 : The pooling centre forwards the
message to the NEFT Clearing Centre (operated
by National Clearing Cell, Reserve Bank of
India, Mumbai) to be included for the next
available batch.
Step-4 : The Clearing Centre sorts the funds
transfer transactions destination bank-wise
and prepares accounting entries to receive
funds from (debit) the originating banks and
give the funds to (credit) the destination
banks. Thereafter, bank-wise remittance
messages are forwarded to the destination
banks through their pooling centre (NEFT
Service Centre).
Step-5 : The destination banks receive the
inward remittance messages from the Clearing
Centre and pass on the credit to the
beneficiary accounts.
What is IFSC?
IFSC or Indian Financial System Code is an
alpha-numeric code that uniquely identifies a
bank-branch participating in the NEFT system.
This is a 11 digit code with the first 4 alpha
characters representing the bank, and the last
6 numeric characters representing the branch.
The 5th character is 0 (zero). IFSC is used by
the NEFT system to route the messages to the
destination banks / branches.
 How can the IFSC of a bank-branch be found?
Bank-wise list of IFSCs is available with all the
bank-branches participating in NEFT. List of
bank-branches participating in NEFT and their
IFSCs is available on the website of Reserve
Bank of India at 
http://www.rbi.org.in/scripts/neft.aspx. All the
banks have also been advised to print the IFSC
of the branch on cheques issued by branches
to their customers. For net banking customers
many banks have enabled online search / pop-
up of the IFSC of the destination bank branch.
RTGS
 How RTGS is different from National Electronics Funds Transfer
System (NEFT)?
NEFT is an electronic fund transfer system that operates on a
Deferred Net Settlement (DNS) basis which settles transactions in
batches. In DNS, the settlement takes place with all transactions
received till the particular cut-off time. For example, currently,
NEFT operates in hourly batches - there are eleven settlements
from 9 am to 7 pm on week days and five settlements from 9 am
to 1 pm on Saturdays. Any transaction initiated after a designated
settlement time would have to wait till the next designated
settlement time. Contrary to this, in the RTGS transactions are
processed continuously throughout the RTGS business hours.
Is there any minimum / maximum amount
stipulation for RTGS transactions?
Ans. The RTGS system is primarily meant for
large value transactions. The minimum amount
to be remitted through RTGS is ` 2 lakh. There
is no upper ceiling for RTGS transactions.
What is the time taken for effecting funds
transfer from one account to another under
RTGS?
Under normal circumstances the beneficiary
branches are expected to receive the funds in
real time as soon as funds are transferred by
the remitting bank. The beneficiary bank has to
credit the beneficiary's account within two
hours of receiving the funds transfer message.
What about Processing Charges / Service
Charges for RTGS transactions?
Ans. With a view to rationalize the service
charges levied by banks for offering various
electronic products, a broad framework has
been mandated as under:
a) Inward transactions – Free, no charge to be
levied
b) Outward transactions – 
    ` 2 lakh to `. 5 lakh - not exceeding ` 25 per
transaction.
     Above ` 5 lakh – not exceeding ` 50 per
transaction.
What is the essential information that the
remitting customer would have to furnish to a
bank for the remittance to be effected?
The remitting customer has to furnish the
following information to a bank for effecting a
RTGS remittance:
Amount to be remitted
Remitting customer’s account number which
is to be debited
Name of the beneficiary bank
Name of the beneficiary customer
Account number of the beneficiary customer
Sender to receiver information, if any
The IFSC Number of the receiving branch