Centralized electronic payment systems for more banks: RBI
The RBI has permitted all licensed banks to take part in the centralized electronic payment systems. In its notification, the RBI declared its decision to enlarge the sub-membership route to allow RRBs (Regional Rural Banks) and Co-Operative Banks to participate in the NEFT (National Electronic Funds Transfer) system and RTGS (Real Time Gross Settlement) system.
Objective: To popularize electronic transfer of funds. As at present, the centralized payment systems can be accessed only by members that include public and private sector banks.
About NEFT, RTGS and Difference b/w NEFT and RTGS
What is NEFT?
National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme, individuals, firms and corporate can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme.
Is there any limit on the amount that could be transferred using NEFT?
No. There is no limit – either minimum or maximum – on the amount of funds that could be transferred using NEFT. However, maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances to Nepal.
Can remittances be sent abroad using NEFT?
No. However, a facility is available to send outward remittances to Nepal under the Indo-Nepal Remittance Facility Scheme.
What are the other transactions that could be initiated using NEFT?
Besides personal funds transfer, the NEFT system can also be used for a variety of transaction including payment of credit card dues to the card issuing banks. It is necessary to quote the IFSC of the beneficiary card issuing bank to initiate the bill payment transactions using NEFT.
What is RTGS?
RTGS is a continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time. 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the RBI, the payments are final and irreversible.
Is there any minimum / maximum amount stipulation for RTGS transactions?
Minimum Yes, Maximum No. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is Rs 2 l akh. There is no upper limit for RTGS transactions.
Banks could use balances maintained under the cash reserve ratio (CRR) instead of the intra-day liquidity (IDL) to be supplied by the central bank for meeting any eventuality arising out of the real time gross settlement (RTGS).
How RTGS is different from NEFT?
NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually.
E.g.: Currently, NEFT operates in hourly batches - there are eleven settlements from 9 am to 7 pm on week days and five settlements from 9 am to 1 pm on Saturdays. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours.
So, if a person surpasses the last time slot to deliver instruction, his/her funds will be transferred the following day in the first time slot.
Thus in short we can say that, NEFT Transactions happen in batches during a day and not on REAL TIME (continuous) basis. While RTGS Transactions happen on continuous basis.