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NEFT, RTGS and CTS Explained

Online money transferring is a common practice today. It has made life amazingly quicker and very efficient when it comes to top priority tasks like paying bills, fees, trade payments,etc. Also the fact that these methods are very secure and assisted by the banks makes it a much better alternative to physical cash handling and payments.

In this post we educate you about the basic method of money transfer used today are:

National electronic funds transfer (NEFT)

NEFT is a very basic method of funds transfers which is recommended for payments of large amounts in thousands. NEFT transfers can be carried out only within India. It is a direct bank to bank transfer and the service is directly available in banks recognized by the Reserve Bank India for NEFT.

Benefits of NEFT

  • It’s a quicker way transferring money than wire transfers.
  • Cheaper than wire transfer

Attributes of NEFT are listed as below:

  • NEFT works in a manner of batches. The whole transfer process is segmented into small hourly batches and then completed.
  • In order to initiate the NEFT process, the customer needs to be registered with his/her respective bank for third party transfers. The registration process generally takes up to 12-24 hours.
  • After the registration is done, one can simply choose the mode of payment i.e. whether NEFT or RTGS. There is no upper or lower limit for a NEFT. The NEFT requires you to know the account details such as Bank account holder’s name, bank IFSC code, amount to be remitted and some other details.
  • NEFT can be made only during the bank timing hours i.e. 8am-4:30pm on weekdays and 8am-1pm on Saturdays.
  • NEFT transaction charges include a basic minimum fee ranging from ₹2.5 to ₹50 for transactions worth lakh, plus the service tax.

Real Time Gross Settlement (RTGS)

Real time gross settlement, to be put in simple words is an advanced version of the NEFT with faster response and transactions. The major difference between the NEFT and RTGS transfers is the way the transaction is done. Features and characteristics of RTGS are listed below:

  • As in the name, RTGS does transfers in “real time” and it’s an ongoing process which keeps continuing throughout the banking hours simultaneously.
  • RTGS also adopts a gross settling method. This means that settlement is done immediately without delay and an individual settlement is adopted based on one by one instruction basis. This is the reason why RTGS is the fastest means of money transfer that is available to the Indian people nowadays.
  • Unlike NEFT, there is a lower limit of ₹2 lakhs while making the RTGS transfers. This is done to basically filter out the traffic that the banking community sees.  And only amounts above ₹ 2lakhs are given the priority method of the RTGS transfers.
  • Both in NEFT and RTGS, there is special provision for corporate accounts and they can transfer funds up to ₹50 lakhs if registered under the Vyapaar tag and up to ₹500 crores for Vistaar tag!
  • RTGS transfers can be done in a similar way as that of NEFT and also by Internet banking by choosing the Inter-Bank transfer options.

Following are the transaction charges for NEFT and RTGS:

NEFT & RTGS Charges

By the help of technology today, we have advanced means of online transfers. However by means of advanced technology, we have managed to improve upon an earlier system of transfer as well.

Cheque Truncation System (CTS)

Cheque Truncation System Process Flow

Cheque truncation system is a revolutionized way of handling cheques by using Imaging and MICR code readers implemented by the RBI in September 2008. Without disturbing the customer’s regime, the people simply deposit their cheques in the bank as they used to do earlier. The bank now uses a high quality image scanner which scans the images of the cheques and sends it to a central location for clearance known as the Clearing house (CH) where the cheque is tested by a procedure known as CHI or Clearing house Interface. The images which are scanned present the data which is to be routed. This data after clearance is sent back to the presenter bank and the cheque is declared clear if everything goes smoothly.

You may want to check out: NEFT v/s RTGS v/s IMPS

Kindly note this is a guest post!

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