Indian settlement systems

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India has two main electronic funds settlement systems for one to one transactions: the Real Time Gross Settlement (RTGS) and the National Electronic Funds Transfer (NEFT) systems. Transactions which are bulk and repetitive in nature are routed through electronic clearing service (ECS) which is further of two categories viz ECS-Credit (one debit and multiple credits e.g. Salary, Dividends) and ECS- debit (one credit and multiple debits e.g. bill payments, SIPs etc.). Local ECS scheme is provided in 81 centres and the Regional ECS scheme at 9 centres across India while the National ECS scheme is operated at Mumbai.[1][2]

Real-time gross settlement[edit]

The acronym 'RTGS' stands for real time gross settlement. The Reserve Bank of India (India's Central Bank) maintains this payment network. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest possible money transfer system through the banking channel. Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. 'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction. Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable.

Fees for RTGS vary from bank to bank. RBI has prescribed upper limit for the fees which can be charged by all banks both for NEFT and RTGS. Both the remitting and receiving must have core banking in place to enter into RTGS transactions. Core Banking enabled banks and branches are assigned an Indian Financial System Code (IFSC) for RTGS and NEFT purposes. This is an eleven digit alphanumeric code and unique to each branch of bank. The first four letters indicate the identity of the bank and remaining seven numerals indicate a single branch. This code is provided on the cheque books, which are required for transactions along with recipient's account number.

RTGS is a large value (minimum value of transaction should be INR2,00,000) funds transfer system whereby financial intermediaries can settle interbank transfers for their own account as well as for their customers. The system effects final settlement of interbank funds transfers on a continuous, transaction-by-transaction basis throughout the processing day. Customers can access the RTGS facility between 9 am to 4:30 pm (Interbank upto 6:30 pm) on weekdays and 9 am to 2:00 pm (Interbank upto 3:00 pm) on Saturdays. However, the timings that the banks follow may vary depending on the bank branch. Time Varying Charges has been introduced w.e.f. 1 October 2011 by RBI.

Banks could use balances maintained under the cash reserve ratio (CRR) and 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). The RBI fixed the IDL limit for banks to three times their net owned fund (NOF).

The IDL will be charged at INR25 per transaction entered into by the bank on the RTGS platform. The marketable securities and treasury bills will have to be placed as collateral with a margin of five per cent. However, the apex bank will also impose severe penalties if the IDL is not paid back at the end of the day.

National electronic fund transfer[edit]

The national electronic fund transfer (NEFT) system is a nation-wide system that facilitates individuals, firms and corporates to electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country. For being part of the NEFT funds transfer network, a bank branch has to be NEFT-enabled. As at end-January 2011, 74,680 branches / offices of 101 banks in the country (out of around 82,400 bank branches) are NEFT-enabled. Steps are being taken to further widen the coverage both in terms of banks and branches offices.

Indo-Nepal Remittance Facility Scheme[edit]

Indo-Nepal Remittance Facility is a cross-border remittance scheme to transfer funds from India to Nepal, enabled under the NEFT Scheme. The scheme was launched to provide a safe and cost-efficient avenue to migrant Nepalese workers in India to remit money back to their families in Nepal. A remitter can transfer funds up to INR50,000 (maximum permissible amount) from any of the NEFT-enabled branches in India.The beneficiary would receive funds in Nepalese Rupees.

Service Charge for RTGS[edit]

a) Inward transactions – 1%, no charge to be levied.

b) Outward transactions –
- For transactions of INR2 lakhs to INR5 lakhs -upto INR25 per transaction plus applicable Time Varying Charges (INR1/- to INR5/-); total not exceeding INR30 per transaction, (+ Service Tax).
- Above INR5 lakhs - INR50 per transaction plus applicable Time Varying Charges (INR1/- to INR5/-); total charges not exceeding INR55 per transaction, (+ Service Tax).

No time varying charges are applicable for RTGS transactions settled up to 12:30 hrs.

Service Charges for NEFT[edit]

The structure of charges that can be

a) Inward transactions at destination bank branches (for credit to beneficiary accounts):

  • Free, no charges to be collected from beneficiaries

b) Outward transactions at originating bank branches (charges for the remitter):

  • For transactions up to INR10,000: not exceeding INR2.50 (+ Service Tax)
  • For transactions above INR10,000 up to INR1 lakh: not exceeding INR5 (+ Service Tax)
  • For transactions above INR1 lakh and up to INR2 lakhs: not exceeding INR15 (+ Service Tax)
  • For transactions above INR2 lakhs: not exceeding INR25 (+ Service Tax)

Settlement Timings[edit]

Currently, NEFT operates in hourly batches - there are twelve settlements from 8:00 AM to 6:30 PM on week days and six settlements from 8 AM to 1 PM on Saturdays.

Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. As of 2013, all transactions initiated before 5 PM will be settled on same day.

RTGS transactions are processed continuously throughout. The RTGS service window for customer's transactions is available from 9:00 hours to 16:30 hours on week days and from 9:00 hours to 14:00 hours on Saturdays for settlement at the RBI end.

No Transaction on weekly holidays and public holidays.

RBI Holidays for 2014[edit]

The declared holidays beside Sunday in the NEFT System for the calendar year 2014 are as under :

  • April 1, 2014 (Annual Closing of banks)
  • April 18, 2014 (Good Friday)
  • July 1, 2014 (Annual Closing of RBI)
  • July 29, 2014 (Id-Ul-Fitre)
  • August 15, 2014 (Independence Day)
  • October 2, 2014 (Mahatma Gandhi Jayanti)
  • October 3, 2014 (Dasara / Vijaya Dashami/Maha navami)
  • November 4, 2014 (Muharram)
  • December 25, 2014 (Christmas Day)[3]

During state holidays ,NEFT transactions cannot be initiated towards branches during those days .

Immediate Payment Service (IMPS)[edit]

Immediate Payment Service (IMPS) is an initiative of National Payments Corporation of India (NPCI). It is a service through which money can be transferred immediately from one account to the other account, within the same bank or accounts across other banks. Upon registration, both the individuals are issued an MMID(Mobile Money Identifier) Code from their respective banks. This is a 7 digit numeric code. To initiate the transaction, the sender in his mobile banking application need to enter the registered mobile number of the receiver, MMID of the receiver and amount to be transferred. Upon successful transaction, the money gets credited in the account of the receiver instantly. This facility is available 24X7 and can be used through mobile banking application. Some banks have also started providing this service through internet banking profile of their customers. Though most banks offer this facility free of cost to encourage paperless payment system, ICICI bank and Axis bank charge for it as per their respective NEFT charges.

Nowadays, money through this service can be transferred directly also by using the receiver's bank account number and IFS code. In such case, neither the receiver of the money need to be registered for mobile banking service of his bank, nor does he need MMID code. IMPS facility differs from NEFT and RTGS as there is no time limit to carry out the transaction. This facility can be availed 24X7 and on all public and bank holidays including RBI holidays.


The key difference between RTGS and NEFT is that while RTGS is on gross settlement basis, NEFT is on net settlement basis. Besides, RTGS facilitates real-time ("push") transfer, while NEFT involves twelve settlements from 8 am to 7 pm on week days and six settlements from 8 am to 1 pm on Saturdays. Customers can access the RTGS facility between 9 am to 4:30 pm on weekdays and 9 am to 1:30 pm on Saturday. Thus if a customer has given instruction to its bank to transfer money through NEFT to another bank in the morning hours, money would be transferred the same day, but if the instruction is given much later during the day, money may be transferred next day.

RTGS facility is available in over 72,000 branches across India, while NEFT is available in little over 75,000 branches of a 100 banks.


  1. ^ "Electronic Clearing Services FAQs". Retrieved 8 January 2014. 
  2. ^ "List of ECS Centres". Retrieved 8 January 2014. 
  3. ^ "RTGS Holidays – 2014". Retrieved 25 January 2014.