Electronic Funds Transfer (EFT) is a system for transferring money from one bank account to another electronically, without any physical exchange of cash. It’s the backbone of digital payments in India.
Major EFT Systems in India
The three main EFT systems, all managed by the Reserve Bank of India (RBI), are NEFT, RTGS, and IMPS.
1. National Electronic Funds Transfer (NEFT)
A nationwide payment system that facilitates one-to-one fund transfers.
- How it works: NEFT operates on a Deferred Net Settlement (DNS) basis.
- This means transactions are processed in batches. The clearing house adds up all the transactions received in a specific time window (e.g., half an hour) and settles them together.
- Key Features:
- Settlement: In half-hourly batches, 24x7x365.
- Transaction Limits: No minimum or maximum limit.
- Use Case: Ideal for regular, non-urgent fund transfers of any value.
- Example: Paying your monthly rent or transferring ₹15,000 to a friend’s account.
2. Real-Time Gross Settlement (RTGS)
- What it is: A system where fund transfers are settled instantly and individually.
- How it works: RTGS operates on a real-time and gross basis.
- Real-time: The transaction is settled as soon as it is processed. There is no waiting period.
- Gross Settlement: Each transaction is settled on a one-to-one basis without being bundled with others.
- Key Features:
- Settlement: Instantly, 24x7x365.
- Transaction Limits: For high-value transactions only.
- Minimum: ₹2 lakh.
- No maximum limit.
- Finality: The settlement is final and irrevocable.
- Example: A company pays a supplier ₹50 lakhs for a large consignment.
3. Immediate Payment Service (IMPS)
An instant, real-time interbank fund transfer system managed by the National Payments Corporation of India (NPCI).
- How it works: It is available 24x7x365, including on bank holidays. It allows you to transfer money instantly using the beneficiary’s mobile number (with MMID) or account number and IFSC.
- Key Feature: It was the first system in India to offer truly instant, round-the-clock fund transfers and is the technology that powers many UPI transactions.
- Transaction Limit: Up to ₹5 lakh per transaction.
- Example: Transferring ₹5,000 to a friend at 11 PM on a Sunday. The transfer happens instantly.
Summary Table: NEFT vs. RTGS vs. IMPS
Feature | NEFT | RTGS | IMPS |
Settlement | In Batches (Half-hourly) | Real-Time (Instantly) | Real-Time (Instantly) |
Availability | 24x7x365 | 24x7x365 | 24x7x365 |
Min. Value | No Limit (₹1) | ₹2 lakh | No Limit (₹1) |
Max. Value | No Limit | No Limit | ₹5 lakh |
Managed By | RBI | RBI | NPCI |
Ideal For | Any value, non-urgent payments | High-value, urgent payments | Small to medium value, urgent, 24×7 payments |
Summary
EFT Systems have revolutionised banking by enabling the seamless movement of money without physical cash. NEFT is designed for regular transfers of any amount and works in batches. RTGS is meant for urgent, high-value transfers (above ₹2 lakh) and settles them individually and instantly. IMPS, managed by NPCI, offers instant, 24×7 transfers for amounts up to ₹5 lakh and is the engine behind many modern digital payments. Understanding the specific use case, limits, and settlement mechanism for each is key.
Quick Revision Points
- EFT: Electronic transfer of money.
- NEFT: Settles in batches; no minimum or maximum limit.
- RTGS: Real-time settlement for high-value transactions (₹2 lakh and above).
- IMPS: Instant, 24×7 service; limit is ₹5 lakh.
- Managed By: NEFT and RTGS are managed by RBI. IMPS is managed by NPCI.
- Availability: All three systems are now available 24x7x365.