Money Transfer | Know How to Choose Between NEFT, RTGS, and IMPS

December 30, 2021 Mutual Fund

For Centuries, we have been following the physical mode for exchanging or transferring cash while making payments. However, money transfer has come a long way, and currently, we prefer the ease and convenience of electronic money transfers. Although most of us are familiar with electronic money transfers, some often get confused while choosing the suitable payment mode from several available options. Hence, in this article, we will discuss the basic electronic money transfer options – NEFT, RTGS, and IMPS, which you have probably used several times but do not know its meaning, difference, and which one to choose when and why.

What are the different ways of doing an electronic Money Transfer?

An electronic money transfer can be done almost immediately from one bank account to another. It allows the users to send and receive money from anywhere and anytime. The primary methods used for money transfer are:

1. National Electronic Fund Transfer (NEFT)

2. Real-Time Gross Settlement (RTGS)

3. Immediate Payment Service (IMPS)

Let’s understand them in detail:

1. National Electronic Fund Transfer (NEFT):

• NEFT is a nationwide centralised payment system, owned and operated by the Reserve Bank of India (RBI).

• The NEFT lets you transfer funds securely from one bank account to another across all the branches of all the types of participating banks.

• It is available 24*7, 365 days.

• The NEFT does not work on a one-on-one basis; it makes payments in batches of half an hour.

• There is no requirement of the minimum amount to be remitted. So, you can transfer as low as Re 1 through NEFT.

• Although there is no maximum limit on the amount that can be transferred through NEFT, different banks have set different limits.

• Money transfer through NEFT can be done online through internet banking/ mobile banking or offline by visiting your bank branch.

• On successful remittance, the remitter receives the confirmation through an email/ SMS.

• There is no levy of charges by the RBI from banks. Hence, the banks charge negligible fees for fund transfers through NEFT.

• There are absolutely no charges for online NEFT transactions of Savings Bank Account customers.

• Apart from fund transfer, the NEFT can also be used for credit card payments, Loan EMI payments, inward foreign exchange remittances, etc.

• It can also be used for one-way fund transfers from India to Nepal.

• For transferring funds through NEFT, the remitter needs to have below mentioned details of the beneficiary:

  – Name of the beneficiary as per their bank records

  – Account number of the beneficiary

  – Account type of the beneficiary (i.e., Savings A/c, Current A/c, etc.)

  – Name of the beneficiary bank and branch

  – The IFSC (Indian Financial System Code) of the beneficiary bank branch

  – Amount to be credited

2. Real-Time Gross Settlement (RTGS):

• RTGS works on a continuous and real-time settlement of money transfers, individually on a transaction-by-transaction basis.

• The RBI says, 'Real Time' means the processing of instructions at the time they are received, and 'Gross Settlement' means that the settlement of fund transfer instructions occurs individually.

• RTGS lets you transfer funds from one bank account to another across all the branches of all the types of participating banks.

• RTGS is available 24*7, 365 days, since 14th December 2020.

• Since it works on a real-time basis, the clearance is done immediately.

• The minimum amount to be remitted through RTGS is Rs 2,00,000.

• There is no cap on the maximum amount that can be transferred through RTGS.

• You may use the online facility through internet banking or mobile banking or visit your bank for offline RTGS.

• This eliminates the risks of using a physical cheque for high-value transactions, such as loss or theft of cheque/ demand draft and the likelihood of fraudulent encashment thereof.

• The RBI has capped the transaction charges levied by banks on money transfers through RTGS.

• For transferring funds through RTGS, the remitter needs to have below mentioned details of the beneficiary:

  – Name of the beneficiary as per their bank records

  – Account number of the beneficiary

  – Account type of the beneficiary (i.e., Savings A/c, Current A/c, etc.)

  – Name of the beneficiary bank and branch

  – The IFSC Code of the beneficiary bank branch

  – Amount to be credited

3. Immediate Payment Service (IMPS)

• IMPS is offered by the National Payments Corporation Of India (NPCI), which lets you transfer money instantly through banks and RBI authorised Prepaid Payment Instrument Issuers (PPI) across India.

• Since its launch, IMPS has become the most popular fund transfer method mainly because it was the only payment method available 24*7*365. However, to promote online banking, the RBI had decided to make NEFT and RTGS available round the clock on all days. So, currently, all three payment methods work 24*7*365.

• As the name suggests, it transfers the money immediately to the beneficiary.

• Similar to RTGS, the IMPS works on a one-on-one basis.

• There is no minimum amount requirement for remittance through IMPS.

• The maximum amount that can be transferred at a time through IMPS is now increased to Rs 5,00,000 (except for SMS and IVR transactions) from its earlier limit of Rs 2,00,000.

• An IMPS transaction can be initiated only online.

• The remitter receives transaction confirmation (both debit and credit) through SMS.

• Through IMPS, you can send money, receive money, check the functionality of a beneficiary account, check transaction status, as well as receive foreign inward remittance.

• You can use IMPS through the following channels:

  – Mobile phones (by SMS or USSD – Unstructured Supplementary Service Data)

  – Smartphone (Mobile Banking App, SMS, WAP – Wireless Application Protocol, USSD)

  – Internet banking

  – Automated Teller Machine, i.e., ATM channels (by using ATM card at bank's ATM)

• For transferring funds through IMPS, the remitter needs to have the below-mentioned details of the beneficiary:

  – MMID (Mobile Money Identifier) and mobile number or account number and IFSC or Aadhar number

  – Amount to be transferred

  – Sender's M-PIN (Mobile Banking Personal Identification Number)

• MMID is a 7-digit number issued by banks, which needs to be clubbed with a mobile number to facilitate fund transfers. It is uniquely linked with the account number and helps identify the beneficiary details.

• To transfer money using MMID and mobile number, a customer must register for mobile banking. However, to transfer money through IMPS using an account number and IFSC or Aadhar number, there is no need to do mobile registration.

• The individual banks and PPIs decide the charges for IMPS.

What are the basic differences between NEFT, RTGS, and IMPS?

This article first appeared on PersonalFN here