RTGS vs NEFT: Key Differences, Charges, Limits & Timings Explained

Think missing a payment window is no big deal? Think again. 82% of businesses identify moderate to severe disruption in cash flow from delayed payments. Most of the time, the issue isn't slow-paying customers, it's the wrong payment system.

Like using NEFT when RTGS is what you really need. Both get your money from point A to point B, but they go about it in very different ways. NEFT is ideal for repeat, small transfers where cost and flexibility are important. RTGS is designed for large, urgent payments that must clear immediately. 

Choose the right one, and your cash flow remains smooth. Choose the wrong one, and you might be running after late payments and incurring unnecessary expenses.

This blog clears the confusion between NEFT vs. RTGS in terms of speed, limits, and fees, all spelled out. 

RTGS (Real-Time Gross Settlement) is a high-value payment system in India intended for large-value interbank fund transfers. It handles instructions in real time and on a gross basis so that each transaction is settled individually from the others.

RTGS has other functions, such as managing liquidity and reducing settlement risk for banks. Since settlements are gross, banks have to maintain a minimum level of balance in their current account with the RBI (Reserve Bank of India).  This influences intraday liquidity needs and makes RTGS a critical tool in monetary policy transmission. 

RTGS was launched in 2004, updated with a new platform in 2013, and made 24×7 in December 2020. This makes India join a list of a few countries operating 24×7 with maximum value settlement.

Here's a quick look at what makes RTGS the go-to choice for high-value, time-sensitive transfers:

• Minimum transaction amount: INR 2 lakh 
• No upper ceiling 
• Working hours are 24×7, 365 days 
• Operated and monitored by RBI (Reserve Bank of India)
• Settles in real time, gross mode 
• Transactions are final and irrevocable

Here's the step-by-step flow of how RTGS works:

1.The sender initiates an RTGS transfer via internet banking or at a branch with the beneficiary's IFSC code.

2.The sending bank sends the instruction to the RBI's RTGS system.

3.RBI (Reserve Bank of India) checks whether the bank has sufficient funds in its settlement account.

4.Once confirmed, the RBI debits the sending bank and credits the receiving bank instantly. 

5.The beneficiary's bank credits the recipient account immediately. A Unique Transaction Reference (UTR) number is generated for tracking.

NEFT (National Electronic Funds Transfer) is a payment system operating nationally to facilitate one-to-one transfers of funds on a Deferred Net Settlement (DNS) basis, extensively used by retail consumers. It pools together transactions in half-hourly packages and nets off the positions between the banks.

It's ideal for retail digital payments for low-value transactions, crediting salaries, and vendor payments.

NEFT is now running 24×7 with 48 half-hourly settlement cycles throughout the day (a facility introduced in December 2019).

Now, let's take a look at NEFT and what makes it the preferred option for routine, everyday business transactions:

• No upper or lower limit on the transaction size (can be as low as INR 1)

• Settles in batches every half hour (48 cycles a day)

• Operates 24×7, 365 days

• Run by RBI (Reserve Bank of India), reaching virtually all Indian bank branches.

• More liquidity-effective than RTGS (net settlement)

• Used extensively for salaries, bills, and SME payments

Here's a quick look at how NEFT actually moves money, step by step:

• The sender initiates a payment request via internet banking, mobile app, or branch using the beneficiary's IFSC code.

• The sending bank forwards the instruction to the RBI's NEFT system.

• Transactions are queued until the next half-hourly batch.

• RBI calculates the net positions of all participating banks.

• Funds are settled between banks, and the receiving bank credits the beneficiary. A UTR number is generated for tracking.

Although RBI (Reserve Bank of India) runs both NEFT and RTGS, and are both credible interbank transfer systems, they vary in speed, settlement, transaction limits, and charges:

Speed and settlement mechanism

If you're wondering, NEFT vs. RTGS which is faster? The answer is always RTGS.

In RTGS, the transfer happens immediately. As soon as you press confirm, the RBI facilitates the payment through banks, and the funds are credited to the beneficiary account in a matter of seconds. The payments are cleared one by one, hence no waiting time.

Transfers are cleared in batches every half an hour in NEFT. That is, if you pay just before a batch is cleared, it may happen at lightning speed. If you miss a cycle, though, you would have to wait a few minutes for the next one. 

Transaction limits 

RTGS has a minimum of INR 2 lakh per transaction with no maximum limit. It is the preferred choice for high-value transactions such as property purchases, corporate payables, or interbank transactions. It's not suited for small-value payments.

NEFT does not have any lower or upper limit on transactions. Whether it is INR 1 or INR 50 lakh, NEFT can do it (depending on your bank's policy). That is why it is the default for retail payments, SME payments, and regular expenses.

Charges

Let's break down these charges in detail:

RTGS charges

• Online RTGS: With RBI's insistence on digital banking, RTGS is typically free if initiated online. That is, if you're making the money transfer through net banking or your bank's mobile app, you'll most probably pay nil.

• Branch-based RTGS: If you go to a branch to do it, there are charges, and RBI prescribes a maximum limit:

• INR 2 lakh to INR 5 lakh: Up to INR 24.50 + GST

• Above INR 5 lakh: INR 49.50 + GST

Various banks vary slightly within those limits. For instance:

• SBI charges approximately INR 20 + GST for INR 2-5 lakh and INR 45 + GST above INR 5 lakh.

• HDFC Bank tends to charge a flat rate of INR 15 + GST, irrespective of value.

NEFT charges

• Online NEFT: NEFT transfers done through net banking or mobile apps are also free.

• Branch-based NEFT: If you approach a branch, here's the charges outline (max as per RBI):

• Up to INR 10,000: INR 2.50 + GST

• INR 10,000 - INR 1 lakh: INR 5 + GST

• INR 1 lakh - INR 2 lakh: INR 15 + GST

• More than INR 2 lakh: INR 25 + GST

Example: At Indian Bank, these fees are approximately as mentioned above slabs. For INR 1.5 lakh, you'd pay approximately INR 15 + GST.

Still wondering how the two stack up against each other? Here's a quick snapshot of RTGS vs. NEFT, side by side:

The choice isn't about which system is better overall, but which one suits the situation you're in.

Choose RTGS when:

• The payment is INR 2 lakh or above, and the other party needs the money right away. This could be settling a high-value invoice, releasing a security deposit, or making a time-bound vendor payment.

• Cash flow certainty matters. Because RTGS runs in real time and settles directly in the RBI's books, once the payment goes through, it's final - no reversals, no waiting.

• You're working with counterparties who need reassurance. Many businesses and financial institutions prefer RTGS for large sums because it reduces credit and settlement risk.

Choose NEFT when:

• You're dealing with small or medium payments—routine payouts, vendor fees, subscription costs, or reimbursements.

• Cost efficiency outweighs urgency. Online NEFT transactions are free for individuals, and businesses often get affordable bulk transfer options.

• A slight delay is acceptable. With half-hourly settlement cycles running round the clock (including weekends and holidays), NEFT is highly dependable even if it's not truly "instant."

Each industry has its own patterns:

Corporates

Large firms typically use both systems. If there is a high-value, time-sensitive payment such as clearing bills of suppliers, transferring funds between group companies, or settling high tax dues, RTGS is the natural choice.

But where the purpose is to make bulk payments like salaries of employees, invoices of vendors, or utility bills, NEFT is much faster and economical. By using both together, corporates can balance between cost and quickness.

SMEs

If you run a small or medium-sized business, chances are most of your payments go through NEFT. It's low-cost, easy to use, and perfect for daily transactions like paying suppliers, service providers, or rent. 

You might switch to RTGS occasionally for a bigger purchase or when a supplier needs immediate clearance, but for day-to-day operations, NEFT usually does the heavy lifting.

Export-Import businesses

In international business, timing is everything when it comes to closing a transaction. That's why RTGS is so important in this context. It ensures the timely, immediate, and safe settlement of large-value transactions associated with forex dealings. This becomes crucial when paying out shipments or conforming to contractual timelines.

NEFT remains useful for settling domestic expenses such as local movement, storage, or smaller bills from vendors, but where urgency and finality become considerations, RTGS is the preferred mode.

Retail and individuals

For entrepreneurs and self-employed professionals, NEFT works perfectly for vendor payments, contractor fees, and subscriptions. It's convenient, reliable, and typically free online.

RTGS, however, is ideal for big-value, time-critical transactions, such as a big client payment, a house sale, or a huge one-off investment. The immediacy and certainty of RTGS are worth paying for in such cases, even though there's a minor charge.

With Xflow, you receive payments through RTGS and NEFT smoothly. Your high-value transfers are executed fast and safely, while your regular transactions take place dependably without any manual inconvenience. You know where your money is at all times, eliminating delays and confusion.

Transparent costs and currency management

Xflow lets you know the precise cash you will receive, even for foreign remittances. Clarity over costs and exchange rates allows you to budget your cash flow precisely.

Compliance without the stress

All RBI (Reserve Bank of India) and FEMA documents are automated. That translates to you being completely compliant, minimizing manual work, and audit-ready at all times, without wasting hours on paperwork.

Integration with your tools

Xflow integrates with accounting and trading platforms, which automatically support reconciling your payments into your books. This minimizes errors and keeps your books updated.

Ready to streamline your payments? Sign up with Xflow today and experience faster, smarter RTGS and NEFT transfers.