NEFT vs RTGS: What is the Difference Between NEFT and RTGS?

Among the electronic payment systems in India, NEFT and RTGS are two commonly used methods for online money transfer. Though both facilitate secure electronic transactions, they differ in key aspects such as processing speed, transaction limits, and suitability for various transfer needs.

This article explains the difference between RTGS and NEFT, and their advantages and disadvantages.

NEFT vs RTGS: What is the Key Difference?

The key difference between NEFT and RTGS lies in their payment processing methods. NEFT is ideal for small value transactions that operate in batches while RTGS is used for high-value transactions that settle payments in real-time.

The key difference between their features is also includes:

NEFT vs RTGS: Explained in Detail

What is NEFT?

NEFT (National Electronic Funds Transfer) is an electronic payment system operated by the Reserve Bank of India (RBI) that enables fund transfers between bank accounts. You can conveniently transfer funds using NEFT through online banking, mobile apps, or by visiting your bank branch.

NEFT employs a net settlement system, meaning transactions are accumulated and processed in batches at half-hourly intervals throughout the day. This batch processing system contributes to its lower NEFT transaction charges compared to real-time payment systems like RTGS.

While there is no minimum or maximum amount limit for NEFT transactions, individual banks may impose their own charges for using the service. It’s advisable to check with your bank for any applicable fees.

What are the details required to transfer funds using NEFT?

The required details to transfer funds using NEFT includes:

• Beneficiary’s full name
• Beneficiary’s bank name, account number and branch
• Beneficiary’s IFSC
• Transfer amount

When you initiate a fund transfer, banks assign a unique UTR (Unique Transaction Reference) that can be used to check the NEFT status.

What is RTGS?

RTGS (Real Time Gross Settlement) is an electronic payment system for high-value and time-sensitive transactions. It processes funds transfers instantly on a one-to-one basis without batching. Instant settlement reduces the risk of online payment failures but requires more liquidity from banks.

You can transfer funds through RTGS via online banking or bank branches. While there is no maximum limit on fund transfer amount, the minimum transaction limit is ₹2 lakh. RTGS charges are capped at ₹50 for transfers exceeding ₹5 lakh. Though fund transfers take place 24×7, 365 days, different banks have exception hours in their RTGS timings.

What are the details required to transfer funds using RTGS?

The required details to transfer funds using RTGS includes:

• Beneficiary’s full name
• Beneficiary’s bank account number and branch
• Beneficiary’s IFSC
• Transfer amount
• Purpose of remittance

RTGS system assigns a Unique Transaction Reference (UTR) to identify the transactions. You can use this number to perform an RTGS status check.

Advantages of NEFT

1. Cost-effective

NEFT transactions are cost-effective for smaller amounts as there are no or minimal charges for fund transfers. 

2. Wide accessibility

You can transfer the funds using NEFT through various methods like net banking, mobile banking apps, and bank branches.

3. No lower limit

Unlike RTGS, NEFT does not have a minimum transaction limit.

4. Suitable for various transaction types

You can use NEFT for a wide range of transactions like personal transfers, bill payments, and business transactions.

Advantages of RTGS

1. Instant fund transfer

RTGS is a real-time, immediate transfer of funds between banks. This is ideal for high-value and time-sensitive transactions.

2. No upper limit

Unlike other electronic payment systems such as IMPS and UPI, RTGS has no maximum RTGS limit per day.

3. Low in risk

RTGS transactions are settled individually and not batch-wise. Hence, the risk of payment default or system-wide issues is minimal. 

4. Helps to improve liquidity of your business

The real-time nature of RTGS allows increased liquidity for your business, as funds are available for use immediately after transfer.

5. Suitable for large-value transactions

RTGS is useful for businesses dealing with large sums of money on a regular basis.

6. Immediate confirmation

RTGS provides immediate confirmation of successful transactions.

Disadvantages of NEFT

1. Delay in processing the transaction

NEFT transactions are processed in batches. This leads to delayed payments to concerned parties where fund transfers are required instantly.

2. Additional transaction charges

As per RBI, There is no transaction charges for savings bank account NEFT transactions. However, Some banks may charge additional fees for NEFT transactions.

3. Limited by transaction limits

Banks like Central Bank of India restricts NEFT transfers to half-hourly slots between 9 AM and 8 PM, Monday through Friday.

4. Limited use for e-commerce platforms

Many online shopping platforms prefer instant payment methods. This makes NEFT less convenient for e-commerce transactions.

5. Cool-off period

You need to wait for at least 30 min to 4 hours after adding the new beneficiary. Only post this cool-off period, you can make the fund transfer to the added beneficiary.

Disadvantages of RTGS

1. Higher transaction costs

RTGS incurs higher charges compared to other electronic payment systems like NEFT or IMPS. This makes it less cost-effective for smaller transactions.

2. Minimum transfer limit

RTGS transfers have a minimum transfer amount limit of ₹2 lakh. This is too high for everyday personal banking needs.

3. Lack of payment scheduling

RTGS system doesn’t allow fund transfer for future dates or recurring payments. This creates inconvenience if you need to make regular payments to concerned parties.

NEFT vs RTGS: Which is Faster?

When comparing the speed of RTGS vs NEFT, RTGS takes the lead. RTGS processes transactions instantly. This makes it the faster option for high-value, time-sensitive transfers. On the other hand, NEFT operates in batches, with transactions processed in half-hourly intervals.

NEFT vs RTGS: Which is Better?

The choice between the two depends on the urgency and value of the transaction. For large, urgent transfers where immediate settlement is important, you can choose the RTGS mode of fund transfer. However, for lower-value transactions where slight delays are acceptable, NEFT is suitable and cost-effective.

Conclusion

NEFT and RTGS are nationwide electronic payment systems with their unique advantages and use cases. NEFT is ideal for smaller transactions and everyday banking needs. It’s cost-effective and widely accessible. While, RTGS is ideal for high-value, time-sensitive transactions. Additionally, RTGS offers improved liquidity, it comes with higher transaction costs and a minimum transfer limit. Understanding the difference between RTGS and NEFT allows you to select the appropriate method for your specific financial needs.

Frequently Asked Questions

1. Should I use NEFT or RTGS for a ₹2 lakh transaction?”

Choose NEFT if you prioritize lower fees and don’t need an immediate transfer. Choose RTGS if you prioritize the funds to be transferred quickly and are willing to pay slightly higher fees.

2. What is the cheaper method between NEFT and RTGS?

NEFT is cheaper for everyday transactions like paying bills, transferring rent, or sending money to friends or families. However, these transactions should typically not exceed INR 2,00,000.

3. When should I use NEFT and when should I use RTGS?

Use NEFT for smaller transactions (up to INR: 2,00,000 lakh), non-time-sensitive transfers, and 24/7 availability. This is ideal for rent or bill payments. Choose RTGS for larger amounts (above INR: 2,00,000 lakh) and time-sensitive transfers.

4. Which is the preferred option for large-scale transfers, NEFT or RTGS?

RTGS is preferred for large-scale transfers, exceeding INR 2,00,000.

5. Are NEFT and RTGS secure?

Yes, NEFT and RTGS are secured electronic fund transfer systems by RBI. They use encrypted channels and require multiple layers of authentication. 

6. Which method offers faster transfers, NEFT or RTGS?

Real-Time Gross Settlement (RTGS) is faster than National Electronic Funds Transfer (NEFT).

7. Is it possible to schedule future transactions with NEFT and RTGS?

RBI does not provide payment schedule feature in NEFT and RTGS to schedule the transactions for future. If you need to schedule future payments, you might consider using other banking services or financial applications that offer this functionality. These services often integrate with NEFT or RTGS.

8. Can NEFT and RTGS be used for international transfers?

No, NEFT and RTGS are not designed for international fund transfers. It is only suitable for domestic payment systems used within India. For sending money abroad, you can use other methods such as SWIFT (Society for Worldwide Interbank Financial Telecommunication) and wire transfers, etc.

9. Are there any alternatives to NEFT and RTGS for fund transfers?

The alternative to NEFT and RTGS is IMPS (Immediate Payment Service), which offers instant 24/7 transfers through online payment methods like UPI (Unified Payments Interface), mobile wallets and traditional methods like demand drafts or cheques.