What is the Difference Between NEFT Vs RTGS Vs IMPS?
6 min read
The ability to transfer money at the click of a button has revolutionised how we handle financial transactions. Whether it’s transferring money to a friend or making an important business payment, the convenience of online banking has simplified the process. A PwC report highlights that the number of digital transactions will triple, and the volume of transactions will double by 2028-29.
Among the various online money transfer methods in India, National Electronic Funds Transfer (NEFT), Real-Time Gross Settlement (RTGS), and Immediate Mobile Payment Service (IMPS) are the most popular choices. While all these methods are useful for transferring money from one bank account to another, the way they operate varies.
Read further for a detailed comparison between IMPS Vs NEFT Vs RTGS to help you choose the right online money transfer options.
Rise of Digital Payments in India
In recent years, digital transactions in India have continued to climb steadily. Following demonetisation in 2016, the government started making conscious efforts to promote cashless transactions. While UPI is highly used for low-value transactions, safe and secure modes like NEFT, RTGS, and IMPS are preferred for large-value transactions. To offer multiple options for digital transfer, RBI introduced NEFT and RTGS while NPCI conceptualised IMPS.
NEFT works on the batch-processing mechanism, and RTGS transactions can be carried out only during banking hours. Therefore, real-time transactions were not always feasible in the country. This gap was bridged with the launch of IMPS in 2010, which allows for a real-time, on-demand, in-hour transfer process at any time of the day, seven days a week. The service currently has over 902 active banks and payment solutions.
What is NEFT (National Electronic Funds Transfer)?
NEFT is an all-Indian system primarily used to transfer funds from one account in India to another. It is thus commonly accepted for remittance. NEFT has been brought into effect by the Reserve Bank of India and enables electronic payment transactions safely and soundly through systematic procedures. This uses a centralised clearing mechanism, where inter-bank accounts are settled in batches. Therefore, it facilitates high-speed processing of multiple transactions.
Merchants that offer multiple payment methods generally allow for bank transfers. In most cases, these transactions are carried out as NEFT transactions, where the customer account is debited immediately. In contrast, the merchant account will be credited after the NEFT batch process.
NEFT transactions are carried out in batches and thus, they may take up to 2 hours to complete. However, users can initiate NEFT 24 x 7, meaning that you can send money via NEFT at any time of the day, but the beneficiary’s account will be credited during banking hours based on the batch processing. Based on the amount transferred and bank charges, the transaction fees for NEFT may vary. NEFT transfers are safe and secure, but they are not instant.
NEFT Key Features
Some of the prominent features of NEFT are:
Half-Hourly Batch Settlements: All transactions are settled in batches during the day.
Processing Time: Transfer times vary between several hours depending on when the request was initiated.
Transfer Limit: No limit for both minimum and maximum transfer for NEFT
Availability: Only during standard bank working hours
Best Use Case: NEFT is best when you must make routine, non-time-sensitive transfers that do not necessarily need to be transferred immediately.
What is RTGS (Real-Time Gross Settlement)?
RTGS is designed to enable fast transactions of high value with final settlements occuring in real time. It is used in transactions requiring fast completion of high-value, time-sensitive payments. The RBI introduced RTGS to ensure the safe and rapid transfer of funds to avoid delays in critical payment transactions.
Unlike NEFT transactions, RTGS transactions are completed in real time. The beneficiary’s account will be credited instantly. Banks must follow the RTGS framework defined by RBI and charges vary from one bank to another. RTGS transfer is available 24 x 7 and the beneficiary will get the credit instantly.
RTGS Key Features
RTGS transactions have the following characteristics:
Real-time Settlements: Unlike NEFT batch processing, funds will be settled instantly without waiting.
Minimum Transfer Amount: Can be used for a minimum amount of ₹2 lakh, and there is no upper limit.
Speed of Transaction: Compared with NEFT, RTGS is faster since payments are processed as soon as requested.
Availability: RTGS is only available during banking hours.
Best Use Case: When sending a high-value payment, which is time-sensitive and where every minute counts, RTGS is the best usage.
What is IMPS (Immediate Payment Service)?
IMPS is a 24×7 money transfer facility that allows a person to make immediate, lower-value transactions instantly. This service was initiated and facilitated through mobile banking, internet banking, or ATMs by the National Payments Corporation of India (NPCI). It ensures fund transfers at any time, even on weekends or holidays. PhonePe offers IMPS fund transfer to any beneficiary bank account to enable instant fund transfer.
IMPS combines the power of both NEFT and RTGS, allowing instantaneous transactions up to a maximum limit of ₹5 lakh. This limit can, however, vary from one bank to another. Similar to NEFT, IMPS enables low-value transfers and like RTGS, the payment credit is instant. IMPS is also available 24 x 7, making this mode of transfer highly convenient and accessible. Most bank-to-bank transfers, merchant payments, and mobile banking transactions are carried out using IMPS mode.
IMPS Key Features
The main features of IMPS are given below:
Immediate Transfers: IMPS provides transfers immediately, even outside the usual banking hours.
Transfer Limits: No minimum amount is involved, while a maximum limit is ₹5 lakh (can vary with banks).
Accessibility: It is accessible via mobile apps, internet banking, and ATMs.
Best Use Case: IMPS is perfect for instant, small-scale transactions where the time factor and efficiency are crucial.
Difference Between NEFT, RTGS and IMPS
Choosing the right fund transfer mode for your purpose ensures that the recipient receives the funds on time without complications. Here is a table showing the key differences between NEFT, RTGS, and IMPS:
NEFT, RTGS, and IMPS can be used to transfer funds from one Indian bank account to another. You can use IMPS for day-to-day transactions, which is handy even at odd hours. NEFT is a good choice during banking hours if your payments are relatively large and do not require immediate processing. When it calls for high-value transactions involving immediate settlement, no alternate is as good as RTGS. By making the right choice for the transaction, you can ensure that the funds are transferred promptly.
