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NEFT/ RTGS & Demand Draft

NEFT/ RTGS & Demand Draft:Inter Bank Electronic Fund Transfer from the account of the remitter in one Bank to the account of the beneficiary maintained with any other Bank branch occurs through two systems of Inter Bank Transfer - RTGS and NEFT. Both these systems are maintained by Reserve Bank of India.

RTGS -The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time; 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is Rs.2 lakh. There is no upper ceiling for RTGS transactions.

NEFT -National Electronic Fund Transfer(NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme.However, maximum amount per transaction is limited to Rs.2 lakhfor transfer of funds using NEFT.

How RTGS is different from National Electronics Funds Transfer System (NEFT)?

Ans:NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, currently, NEFT operates in hourly batches. [There are twelve settlements from 8 am to 7 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 Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours.

Demand Draft: A demand draft (also known as DD) is a pre-paid negotiable instrument, wherein the bank by whom the DD has been made undertakes the responsibility to make full payment whenever the instrument is presented for payment. In order to obtain the payment, the beneficiary either has to deposit the same in his bank account or get the same collected through the branch who has made the DD.

While making a DD, the bank deducts the amount from the bank account of the individual who has requested for making the DD and deposits the same in their own account. When the DD is presented for clearing, it is the responsibility of the banker to make the payment.