NEFT and RTGS

Why in news?

• The Reserve Bank of India (RBI) has decided to make available the RTGS (real-time gross settlement system) round the clock on all days from December 2020.
• Currently, RTGS service window for customer transactions is available to banks from 7 am to 6 pm on a working day, for settlement at the RBI end.
• In December 2019, the RBI had made available the National Electronic Funds Transfer (NEFT) system round the clock on all days.

What are NEFT and RTGS?

• RTGS and NEFT are two systems of interbank transfer of funds and are maintained by Reserve Bank of India.
• RTGS - Real Time Gross Settlement is a system where the processing of funds transfer instructions takes place at the time they are received (real time). Also, the settlement of funds transfer instructions occurs individually on an instruction by instruction basis (gross settlement).
• Real Time Gross Settlement System (RTGS) is meant for large-value, instantaneous fund transfers above ?2 lakh while there is no minimum amount for transfer for NEFT.
• NEFT - National Electronic Fund Transfer - This system of fund transfer operates on a Deferred Net Settlement basis. Fund transfer transactions are settled in batches as opposed to the continuous, individual settlement in RTGS.
• Both services are available online and offline.
• In RTGS and NEFT too there is no facility for giving stop payment instruction if the transaction has been initiated by the bank.

PRELIMS QUESTION

Consider the following statements:
1.Real Time Gross Settlement System (RTGS) is an interbank payment system managed by Reserve Bank of India.
2.National Electronic Fund Transfer (NEFT) is  available to banking customers in online mode only.
Which of the statements given above is/are correct?
(a)1 only
(b)2 only
(c)Both 1 and 2
(d)Neither 1 nor 2

Answer to Prelims Question