Real Time Gross Settlement (RTGS) & NEFT
RTGS stands for Real Time Gross Settlement. It is a system for fund transfer where the settlements are taking place on real-time in a continuous manner. Transactions are settled individually on a transaction by transaction basis. 'Real Time' indicates that transactions are completed immediately on completion of transaction. 'Gross Settlement' indicates that the settlement of fund transfers is carried out individually without resorting to netting.
The Real Time Gross Settlement. system has enabled customers of banks to transfer funds between accounts with different banks at lightning speed. The efficiency and effectiveness of Real Time Gross Settlement prompted customers to adopt the system that drastically reduces the dependency on cash and cheques. RTGS, along with NEFT, has become an important instrument towards digital banking journey in India. For transfer of fund through RTGS, both sender and receiver banks should have RTGS facility. As of now, more than 110,000 branches are extending RTGS facility.
Advantages of RTGS:
RTGS offers many advantages over other modes of funds transfer:
- Real Time Gross Settlement is a highly safe and secure system for funds transfer.
- No upper amount ceiling for Real Time Gross Settlement. transactions. Only minimum amount stipulation. Since RTGS is meant for high value transactions, minimum amount for transaction is Rs. 2,00,000 per transaction.
- Real Time Gross Settlement.facility is available on all banking days.( It is not a 24x7x365 system)
- The account of beneficiary receives credit instantly and no time gap between transfer and receipt. The remitter need not use a physical cheque or a demand draft.
- The beneficiary is freed from the hazzles of depositing the paper instruments received from payee and other headaches like safekeeping of instrument, fraudulent encashment etc are eliminated.
- Remitter can also initiate the remittances from his / her home / place of work by using internet banking,
- Minimum transaction cost.
- Legal backing for the transactions carried out through the channel
- Settlement happens instantly and no chances of return, if the beneficiary account number provided is correct.
Details to be provided by remitter to bank for RTGS transaction
The following details are required to be provided by the remitter to his bank to carry out a RTGS transaction
- Amount of remittance
- The account number to be debited.
- Name of the beneficiary customer
- Account number of the beneficiary customer
- Name of the beneficiary bank and branch
- The IFSC code relating to beneficiary/receiving branch
- Sender to receiver message, if any
On completion of successful transaction, the system generates a Unique Transaction Reference (UTR) number. UTR is a 22 character code that can be used to identify a transaction in Real Time Gross Settlement. system. On request, branches provide the UTR number to the sender which he can pass on to beneficiary for follow up, if any, required by him.
IFSC code/number of the receiving branch for RTGS and NEFT
The IFSC code/ number is a unique 11 digit alphanumeric number provided to branches of banks by the Reserve Bank of India (RBI). Each branch is provided with unique number. First four digits are alphabets representing the name of the bank. Remaining 7 digits are used to identify the branch. The remitter can obtain the IFSC number from his beneficiary. Banks are mentioning the IFSC code in the cheque leaves and passbooks/account statements issued to the customers.
Be Careful: Credit under RTGS is approved based on account number alone
RTGS transactions are settled on real time basis. For crediting the account, only account number is matched. The name of beneficiary is not matched as it is possible that there can be spelling difference in the name as per the recipient bank records and that provided by the remitter. Hence, the remitter shall take extreme care while providing the account number of beneficiary as any mistake in the number can lead to wrong credit to unintended parties. Refund in such cases may become difficult as settlement occurs based on the transaction originated by sender/ sender bank. Special care shall be taken while entering account number when initiating transactions through internet banking too.
However, if the amount is not credited to the account mentioned for technical or other reasons, the amount will be refunded to the bank of sender within one hour, which shall be credited to the account of the customer. In case of delay in refund of amount, the originating customer is eligible to receive compensation at current repo rate plus 2%.
What is positive confirmation in RTGS?
Positive confirmation in RTGS is a new customer friendly feature announced by RBI recently. As of now, customers have no facility to track a RTGS transaction. Under the positive confirmation process, the sender bank would receive a message from RBI (which is confirmed by the beneficiary bank to RBI) that the money has been credited to the beneficiary bank / customer account. Based on this, the remitting bank can advise the remitting customer that money has been credited to the receiving bank's beneficiary account. RBI has allowed time to banks till January 15, 2019 for implementation of positive confirmation in RTGS.
Differences between RTGS and NEFT
NEFT stands for National Electronic Funds Transfer. NEFT is also an electronic fund transfer method and hence part of digital banking process. In this fund transfer system, transactions are processed on batch basis and not in real time. Hence, when funds are transferred through NEFT, there can be more delay in crediting to the beneficiaries’ account. However, there is no minimum cap for the amount that can be transferred through NEFT. Since RTGS has a lower stipulation of Rs. 2,00,000, NEFT is the much sought after method for transfer of funds for below Rs. 2,00,000. There is no upper ceiling for NEFT, but because of the real time basis processing, customers prefer sending transactions of Rs. 2,00,000 and above through RTGS. NEFT transactions too can be initiated through internet banking.
Other than the above two features, NEFT follows the processes of RTGS.
