Earlier, the only methods that worked when you needed to transfer cash to something were to physically hand over hard cash or use a cheque or a draft. These methods proved cumbersome, time taking and added to unaccounted transactions. With the recent improvements in the technology used by banks and the impetus on bringing in digital inclusion, there is more than one method of carrying out cash/fund transfer between individuals or businesses. Read on to know more about them.
What is RTGS?
Real-Time Gross Settlement, an innovation of the Indian banking and financial system, refers to the system of settling any payments that have been placed by an individual. This is done across the books of a central bank of India or the RBI. This process is resorted to in the case of large value interbank transfers.
How does RTGS Work?
The words real-time implies that the settlement happens as soon as the receiving bank gets the funds transferred from the sender bank. The word gross settlement implies that transactions are handled and settled at an individual level without bunching them up.
In India, funds above Rs. 2,00,000 can be transferred through RTGS. The maximum amount that can be transferred is Rs. 10,00,000. The RTGS transaction can be initiated through internet banking or by visiting the nearest bank branch.
What are the advantages associated with RTGS?
Using the RTGS method to transact reduces the delivery risk (especially of high value transactions) and a time lag in completion of transactions as the transactions happen in real time. There is a smaller window for critical information to be exposed to vulnerabilities and cyber security attacks.
What are the disadvantages associated with RTGS?
A higher charge is incurred in the case of RTGS payments. There are specific limits to the amounts that can be transferred through this system at once. Also, the customer cannot trace the transaction – only a positive confirmation is received by the remitting bank regarding the fund transfer from the RBI.
What is NEFT?
NEFT or National Electronic Fund Transfer is a fund transfer system that operates on a Deferred Net Settlement (DNS) basis as the settlement is done in batches and not real-time. The payables and receivables are netted and then settled by the originator and receiver bank via the clearinghouse of the central bank.
What are the advantages associated with NEFT?
It is a simple, paperless system that requires no cheque book or demand draft for transferring funds. The facility is available on all days of the year and no charges are levied on the bank account of the customer for online NEFT transactions. There is near real-time funds transfer to the beneficiary account and settlement is completed in a simple and secure manner.
What are the disadvantages associated with NEFT?
The main disadvantage associated with NEFT is that it is a technical alternative for transferring of funds that customers might find difficult to navigate through initially. The funds are also exposed to the risks of cyber security threats.
What is IMPS?
Immediate Payment Service or IMPS refers to the money transfer mechanism that transfers funds instantly. The service is available on one’s mobile phone making it a very convenient mode of fund transfer. This service was launched in the year 2010 by the National Payment Corporation of India (NPCI).
What are the advantages associated with IMPS?
There are numerous advantages associated with transactions in IMPS – the fund transfers can be done with the help of MMID, Aadhaar number, and mobile number, the transaction is safe and cost-effective, it is available 24/7 and the money gets credited to the beneficiaries account in a matter of a few seconds.
What are the disadvantages Associated with IMPS?
There is a maximum limit of Rs. 2,00,000 that can be transferred through IMPS (though this limit might vary). As secure as the system is, it is still vulnerable to some cyber security threats.
Difference Between RTGS, NEFT and IMPS
There are numerous differences that exist between the RTGS, NEFT and IMPS modes of fund transfer. The differences are listed below –
| Basis | RTGS | NEFT | IMPS |
| Meaning | It is a real time fund transfer that happens for high value transactions between two individual accounts. | It is a one-to-one fund transfer that occurs on a half an hour basis. | It is a real time, instant interbank fund transfer that is managed by the NPCI. |
| Minimum transfer value | Rs. 2,00,000 | Re. 1 | Re. 1 |
| Maximum transfer value | Rs. 10,00,000 | No limit | No limit |
| Settlement type | Real time basis | Done every half an hour | Real time basis |
| Payment option | Both online and offline payment can be done | Both online and offline payment can be done | Only online payment mode |
| Inward transaction charges | No charges | No charges | Charges as per the bank |
FAQs on RTGS, NEFT, and IMPS
1. In circ*mstances where the transfer fails, then how long does it take for the funds to be reverted back to the sender’s account?
If the funds are not credited to the beneficiaries account, then the originating bank will revert the funds within a period of one hour or before the end of the business day, whichever is earlier.
2. For what kind of payments can RTGS be used for?
RTGS can be used for interest payments, loan payments, supplier payments, tax payments, trade payments, hedging, cash management transfer and securities transactions.
3. Can the RTGS be rescheduled?
Yes, RTGS can be rescheduled in advance with prior intimation to the bank. This has to be done three working days prior.
4. Can RTGS, NEFT and IMPS be done all through the day?
All three services are available 24/7 and are convenient to complete.
5. Can merchant payments and NRI transfers be done through IMPS?
Merchant payments can be done with the help of IMPS at any time of the day. Even NRI customers can transfer money through IMPS.
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