NEFT vs RTGS Key Differences Explained: Transaction Limits, Settlement Time and More

India's digital payments ecosystem is one of the main pillars of Digital Public Infrastructure. While the National Payments Corporation of India-backed Unified Payments Interface (UPI) witnesses the largest number of transactions in India, the average transaction value remains relatively low. For high-value transactions, people still prefer traditional digital payment methods. With most privately-owned and state-owned financial institutions in India expanding their online banking service portfolio, most digital transaction settlement systems, including Real-Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), and Immediate Payment Service (IMPS), are now present on your phone, apart from being available for offline transactions. However, there are some core differences between each settlement system.

Hence, here is everything you need to know about the two transaction settlement systems, NEFT and RTGS, including maximum and minimum transaction value limits, settlement times, and their benefits.

What is RTGS?

The Reserve Bank of India (RBI) introduced the RTGS payment settlement system in March 2004. Initially, the system enabled the transaction of funds between banks. Later, in August 2004, RTGS was made live to settle payments between one customer's bank account and another. In India, RTGS is used to initiate high-value transactions, typically with a transfer value of over Rs. 2 lakh. When a transaction is completed, the RBI books the transfer in its own books to avoid discrepancies.

RTGS Benefits

1. There is no maximum transaction value limit set by the RBI.
2. The RBI claims that it is a “safe and secure” fund transfer system.
3. It is available on mobile banking apps and internet banking portals.
4. You can visit your bank's branch and use a physical cheque or a demand draft to initiate transactions.
5. You do not have to visit your bank's branch to receive the funds.
6. You do not have to worry about financial losses or theft, as there is no cash involved.
7. The RBI claims that the chances of fraudulent withdrawals are limited.
8. The RBI has imposed an upper limit on the transfer fee that a bank charges.
9. RTGS transactions have legal backing.

What is NEFT?

Launched in 2005 by the RBI, NEFT is another payment settlement system that allows users to transfer money to their peers. It is a centralised nationwide payment system owned and operated by the RBI. With a relatively lower maximum transaction value limit, NEFT is generally used for transferring low-value transactions.

It is also only available for online transactions, where you can initiate via the mobile banking apps on your phone or internet banking portals through your laptop or PC. You can also use NEFT to pay your EMIs or repay other forms of loans.

NEFT Benefits

1. Similar to RTGS, NEFT is also available at all hours of the day throughout the year.
2. It offers “near-real-time” fund transfer to the beneficiary account.
3. NEFT is also a secure way to transfer funds to the accounts of your peers, while being legally backed by the RBI.
4. NEFT allows you to transfer money across the country to all types of banks.
5. It does not require you to visit your bank's branch. You can transfer money from the comfort of your home.
6. The transfer fee is relatively low and varies by bank. If you have a savings bank account, online NEFT transactions do not incur any fee.
7. You can also transfer money to Nepal.

Key Differences Between RTGS and NEFT

Payment Settlement Time

RTGS: The transactions below Rs. 10 lakh are transferred instantly. 

NEFT: It offers “near” real-time payment settlement. The transaction is made within hours.

Minimum and Maximum Transaction Value

RTGS: The RBI has set a minimum transaction value limit of Rs. 2 lakh. However, there is no maximum limit.

NEFT: There is no minimum transaction value limit. Meanwhile, some banks set specific limits for NEFT transactions, so it's best to check with your bank before initiating a transaction.

Transaction Fee

RTGS: Banks levy a transaction fee between Rs. 25 and Rs. 50, depending on the transaction value.

NEFT: Banks charge a fee between Rs. 2.5 and Rs. 25, depending on the transaction value.

Operating Hours

NEFT and RTGS settlement services are available 24 hours a day, on all days of the year, including bank and public holidays.

FAQs

1. What is the minimum amount I can transfer using RTGS?

The RBI allows you to transfer a minimum amount of Rs. 2 lakh.

2. What is the maximum amount I can transfer using NEFT?

You can transfer up to Rs. 2 lakh using NEFT.

3. Does my bank support RTGS and NEFT transactions?

Both are centralised transaction settlement systems available at all banks across India.

4. Can I transfer money through RTGS and NEFT on public holidays?

Yes, both NEFT and RTGS are available at all hours of the day throughout the year, even on public holidays. However, to initiate RTGS transactions by visiting your bank's branch would not be possible on bank holidays.