RTGS, NEFT, EFT, ECS

Remember those days of long queues in bank for withdrawal of money. What you do. Write a cheque, go to bank, stand in queue and take the token, wait for your number to be announced by ding dong bell, you numbers announced you go to withdrawal window and request for good quality currency notes and that fellow angrily look upon you and gives you what he has. So how are that experience and what revolutionary experience you get today? Thanks to the information technology and the upgrades in our banking sector and thanks to Reserve bank of India (RBI) for introducing the paperless work called electronic funds transfer (EFT) mechanism.

Many of us are using internet banking facility almost daily but are unaware of the terms so called EFT, RTGS, NEFT and ECS words. Let us understand the meaning of each and every term in detail here and try to adapt to this latest technology in use.

Electronic Funds Transfer

Electronics Funds Transfer (EFT) is a method in which the money is transferred from one bank account to other bank account in without the paper cheque and paper money. The transaction is done at bank ATM or using Credit Card or Debit card. In RBI-EFT system you authorize the bank to transfer money from your bank account to other bank account that is called as beneficiary account. However, this facility is restricted only to the 15 RBI defined cities such as Mumbai, New Delhi, Chennai, etc. Funds transfers using this service can be made from any branch of a bank at these centres to any other branch of any bank at these cities, both inter-city and intra-city. RBI remains intermediary between the sender's bank called as remitting bank and the receiving bank and effects the transfer of funds. Using this method, funds are credited into the receiver’s account either on the same day or within a maximum period of 4 days, depending upon the time at which the EFT instructions are given and the city in which the beneficiary account is located. Usually the transactions done in first half of the day will get first priority of transfer than the transaction done in second half.

National Electronic Funds Transfer (NEFT)

This is a better version of RBI-EFT system. In RBI-EFT there is a limit in location, whereas in NEFT there is no geographical location problem and only requires both the bank to be NEFT enabled system. Under NEFT, the transfer takes place either on the same day or on the next day, depending on the time of instructions given. NEFT is on net settlement basis. NEFT involves four settlement cycles a day 9.30 am, 10.30 am, 12 pm and 4 pm. 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 transferrd the same day, but if the instruction is given later during the day, money would be transferred next day.

Real Time Gross Settlement (RTGS)

RTGS is an instantaneous funds-transfer system, wherein the money is transferred on a ‘real time’ basis and hence, happens in a real time mode. With this system you can transfer money to other bank account with maximum 2 hours. In this system there is a limit that you have to transfer money only above Rs 1 lakh and for money below Rs 1 Lakh transactions, banks are instructed to offer the NEFT facility to their customers. This is because; RTGS is mainly used for high value clearing. As of now, customers can use the RTGS facility only up to 3 pm and inter-bank transactions are possible up to 5 pm.

Electronic Clearing Service (ECS)

This system is used mainly for credit and debits of low value transactions which are in large or frequent transactions. ECS can be divided into two types: ECS Debit, which involves a transfer of funds from your account and ECS Credit which takes place when money comes into your account. If you opt for monthly interest paying fixed deposit scheme then your monthly interest are getting credited to your account by ECS Credit instruction. Other transactions are dividend received on your investments, your monthly salary credit, refunds from an IPO subscription, etc. Similarly, an ECS Debit involves making utility bill payments directly from your bank account, EMI payments on loans, undertaking investments, etc.