What is the NEFT and RTGS - How this Works

Hi friends today we discuss on, What is the NEFT and RTGS.

National Electronic Funds Transfer NEFT, Real Time Gross Settlement RTGS:-

National electronic fund transfer NEFT

It is the most prominent inter-bank electronic fund transfer system of India which provides facility to bank customer to transfer the funds easily and security one-to-one basis. Which saves the time and is done via electronic message. It is a net transfer facility executed in Hourly batches.

Real time gross settlement (RTGS)

It is a inter-bank transfer system which transfer money from one bank to another on a "real-time" and on a "gross" basis. RTGS system is used for high value transaction which require an immediate Clearing and i s used to transfer of Rs 2 lakhs and above.

How This Works 

In this example consider customer as a person who transfer the money and recipient as a person who will get money.

• Customer fills an application form in which the details (name, bank, bank branch name, IFSC code, types of account, account number, and the amount to be deposited) of the receipients is filled. 
• After filling all detail the customer authorise his/her Bank to debit his account and pay the specified amount to thr recipient.
• Next, the originating Bank (Customer Bank's) branch prepare a message for pooling Centre, called as NEFT service centre.
• NEFT service centre then forward the received message to the NEFT clearing Centre operated by National clearing cell, Reserve Bank of India, Mumbai, for including this transaction in the next available batch.
• NEFT clearing Centre, then sort the funds transfer transaction message destination Bank wise and repair and accounting entries for receiving the funds from the organisation banks (to debit amount from customer account) and give the funds to the destination banks to credit the amount in recipients account.
• After that Bank wise transfer of funds message is forwarded to the destination banks (orginating bank or customer banks) through NEFT service centre.
• Finally, Destination bank orginating bank or Customer banks) received inward fund transfer messages from Clearing center and then pass credit amount to recipient account's.
• Note- Once the payment is processed, it is final and is irrevocable.