NEFT vs RTGS

This is the sixth and last post in the series of Jargons of Online Banking.

Time Limit:
In NEFT, settles the transactions in batches. The settlement takes place at pre-decided points of time. All transactions are held up till that time. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. Contrary to this, in RTGS, transactions are processed continuously throughout the RTGS business hours.

Charges:
Sender might have to pay up to Rs 25 in case of NEFT and up to Rs 50 in case of RTGS.

Minimum Limit on amount of Funds Transfer:
RTGS need that funds transferred should be at least Rs 1 Lakh. There is no such limit in NEFT transfers.

Maximum Limit on amount of Funds Transfer:
No Limit on any of them.

How NEFT works?

This is the fourth post in the series of Jargons of Online Banking.

In last blog, I made a note of some FAQs for NEFT. Let's explore now how NEFT works in detail.

NEFT works as following:

Sender has to provide details of the intended receiver to the bank. This is usually done by "Adding the Payee" in online banking link.

Sender has to initiate the funds transfer either online or by filling in the form available at the bank branch.

Bank prepares a message and sends it to its pooling center in Mumbai.

Pooling center sends it to NEFT clearing center (operated by RBI, Mumbai) so that it can be processed in next batch.

NEFT clearing center sorts the request destination-bank wise and prepares to receive funds from originating bank and give them to destination bank.

Messages are forwarded to destination banks through their pooling center.

Destination banks processes the messages and credits the receiver accounts.

Click on the picture below to see the flowchart of this flow.

NEFT - FAQs

This is the third post in the series of Jargons of Online Banking.

NEFT stands for National Electronic Funds Transfer. It facilitates electronic transfer of funds across various banks. Currently, not all the banks and branches are NEFT enabled. Latest list can be found from RBI site.

The NEFT system takes advantage of the centralized accounting system in banks. The account of a bank that originates or receives funds transfer instructions is operated centrally at Mumbai. However, the branches participating in NEFT can be located anywhere across the country.

Presently, there are six NEFT settlements at 9 AM, 11 AM, 12 PM, 1 PM, 3 PM and 5 PM on week days and three settlements at 9 AM, 11 AM and 12 PM on Saturdays. You must have noticed banking sites to be extremely slow on these times. :)

As per the RBI guidelines, receiver of funds through NEFT cannot be charged. Sender can be charged Up to Rs 5 for transactions up to Rs 1 Lakh and up to Rs 25 for transactions of and above Rs 1 Lakh.

Money will get credited in the receiver’s account on same day or next working day. In case there is any complaint regarding this, contact RBI's Customer Facilitation Center here.

IFSC codes are used to identify various banks-branches.

Tomorrow, read out to know how NEFT works.

Online Banking - Introduction of Jargons

Online banking or Internet banking generally throws some of its own jargons.
I'll be hosting a series on this blog where I'll try to share my notes of some of those jargons.

Jargons covered will be:

MICR Code

IFSC Code

NEFT

How NEFT Works

RTGS

Neft vs RTGS

Stay tuned to read more about them.