What Is NEFT and RTGS and How Do They Differ?

Electronic fund transfers have transformed how money moves between bank accounts. In India, the Reserve Bank of India (RBI) facilitates two prominent systems: National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS). These systems enable individuals and businesses to conduct secure and efficient transactions across participating banks.

National Electronic Funds Transfer (NEFT)

National Electronic Funds Transfer (NEFT) allows for one-to-one electronic fund transfers between NEFT-enabled bank accounts across India. This system operates on a batch-based settlement mechanism, processing transactions in groups at specific intervals throughout the day.

The NEFT system functions 24 hours a day, seven days a week, including weekends and holidays, with settlements occurring in half-hourly batches. Funds are expected to be credited to the beneficiary’s account within two hours of the batch settlement. While the Reserve Bank of India (RBI) does not impose a minimum or maximum transaction limit for NEFT, individual banks may set their own caps, making it suitable for smaller, non-urgent transfers.

Real-Time Gross Settlement (RTGS)

Real-Time Gross Settlement (RTGS) is designed for large-value transactions settled individually and continuously. Each transaction is processed as it is received, in “real-time” and on a “gross” basis, without being netted with other transactions. This immediate processing makes RTGS a rapid method for fund transfers.

RTGS services are available 24 hours a day, seven days a week, and 365 days a year, including public holidays. RTGS has a minimum transaction amount of ₹200,000, with no upper ceiling imposed by the RBI. The beneficiary bank is expected to credit the recipient’s account within 30 minutes of receiving the funds transfer message. This immediate settlement makes RTGS suitable for urgent, high-value payments.

Comparing NEFT and RTGS

NEFT and RTGS, while both electronic fund transfer systems, differ in their operational mechanics and suitability for various transaction types. The primary distinction lies in their settlement processes. NEFT operates on a deferred net settlement basis, processing transactions in half-hourly batches, meaning funds are not transferred instantaneously. In contrast, RTGS facilitates real-time gross settlement, processing each transaction individually and immediately upon receipt.

Regarding transaction limits, NEFT has no minimum or maximum amount specified by the RBI, though individual banks may impose their own limits, making it flexible for various values. RTGS is designed for high-value transfers, requiring a minimum of ₹200,000, with no upper limit set by the RBI.

The speed and urgency of transfers also vary. NEFT is suitable for non-urgent transfers, as funds are credited within two hours of batch settlement. RTGS, with its immediate processing, is ideal for urgent, high-value transactions, crediting the beneficiary within 30 minutes.

Both systems are available 24/7, 365 days a year. NEFT is commonly used for routine payments like utility bills or smaller personal transfers, while RTGS is employed for significant financial movements such as property purchases, large business transactions, or interbank settlements.