Personal Finance

Smooth transactions

Bhavana Acharya | Updated on February 26, 2011

IW27_ONLINE   -  The Hindu

It's quick, it's hassle-free, it can be done from the comfortable confines of your home.

We're talking electronic fund transfers. Hitherto, if you wanted to make a payment from your bank account to a friend, relative or vendor, you had to fill out a cheque or demand draft, factoring in the various charges involved, and not to mention wait in endless queues at banks. Enter NEFT and RTGS to make life simpler!

The basics

These terms which expand as ‘National Electronic Fund Transfer' and ‘Real Time Gross Settlement', are a route through which money transfers between bank accounts are done online. Both routes are for transactions within the country only.

In the NEFT system, a number of transactions are lumped together and settled at one go.

These settlements are done at regular hourly intervals during the day. This system is known as Deferred Net Settlement

Therefore, depending on the time at which you initiate the transaction, credit to the receiver's account will be made on the same or the next day. With NEFT, you can transfer as little as Rs 50 .

RTGS, on the other hand, is where transactions are executed and settled as and when they are initiated – settled ‘real time' or with no or minimum waiting period.

This route of money transfer is the fastest in the banking system. Usually, funds reach the receiver's account within two hours.

RTGS is used for large-size transactions; you need to transfer at least Rs 2 lakh in one go. NEFT/ RTGS transactions open from 9 a.m., but closing times vary with banks.

Benefits of such transfers are their quick processing and low charges. Banks usually charge Rs 5 per NEFT transaction for amounts up to Rs 1 lakh, upping it to Rs 25 for amounts over that. RTGS costs are usually Rs 25 for amounts between Rs 2-5 lakh and Rs 50 above that. Ceilings on amounts transferable vary with banks

These payment routes are not necessarily restricted to individual accounts alone.

Insurance premiums, credit card dues (regardless of the issuing bank) and so on can be paid. Amounts can be transferred only when both sender and receiver bank branches are RTGS/NEFT enabled.

Most banks require internet banking facilities to avail of intra-bank money transfer services; you need to separately register for electronic transfer facilities.

Some, such as Indian Overseas Bank don't require it , but then you need to visit the bank and fill forms.


Effecting a transfer is simple enough. First , you need to add a beneficiary - the bank account to which you want to make the transfer.

For some banks,such as HDFC Bank, this account has to be approved. This process takes a day, so the entire transaction could take a couple of days.

To add a beneficiary, provide their bank account number, name of the account holder, bank and branch name and the IFSC code (Indian Financial System Code – an 11 digit code by which banks and branches are identified).

Fret not if you don't know the code; just search for it by selecting the bank and branch name while registering beneficiary.

The list of IFSC codes is also available on the RBI website.

Adding a beneficiary is a one-time event. Transferring money is then simply selecting the beneficiary and keying in the amount.

Double check amounts, for payments cannot be stopped once transactions are through.

Every transaction has a unique identification number to help track its progress.

Some banks also require contact details of the beneficiary , who receives an acknowledgement that the money is transferred.

If transactions fail, money is credited back to your account.

Banks stand to be penalised if details provided are correct and still the money does not get credited.

If the bank does not solve issues to satisfaction, the Customer Service Department of the RBI can be contacted.

Published on February 26, 2011

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