UPSC Prelims 2025 Q68: RTGS vs NEFT — Settlement, Charges, Timings
Consider the following statements in respect of RTGS and NEFT:
I. In RTGS, the settlement time is instantaneous while in case of NEFT, it takes some time to settle payments.
II. In RTGS, the customer is charged for inward transactions while that is not the case for NEFT.
III. Operating hours for RTGS are restricted on certain days while this is not true for NEFT.
Which of the statements given above is/are correct?
- I only
- I and II
- I and III
- III only
Answer: (a) I only
Statement-wise explanation
- I: correct — RBI defines RTGS as continuous, real-time settlement of each fund transfer, one transaction at a time and without netting, on RBI's books, so a payment is final as soon as it is processed. NEFT does not settle each payment on its own. It runs in batches every half hour, about 48 a day, and settles on a deferred net basis. So an NEFT credit can wait until the next batch is settled.
- II: incorrect — RBI's charge framework makes inward RTGS transactions free; banks may not charge the receiving customer. NEFT inward credits are also free. Banks may charge only for outward RTGS: up to ₹25 plus tax for ₹2–5 lakh and up to ₹50 plus tax above ₹5 lakh. RBI dropped its own processing charges on banks for RTGS and NEFT from 1 July 2019, and online NEFT from savings accounts has been free since 1 January 2020.
- III: incorrect — Both systems now run 24x7x365. NEFT became round-the-clock in December 2019. RTGS followed from 00:30 hours on 14 December 2020. Neither has restricted hours on particular days, so the contrast the statement draws does not exist.
How to eliminate
Statement I is the basic definition of the two systems. 'Real Time Gross' means each payment settles at once, while NEFT is known to run in batches. Once you accept I, only two options remain: 'I only' and 'I and II'. Statement III should go next. The 24x7 RTGS launch in December 2020, a year after NEFT went 24x7, was widely reported. Even before that, NEFT also had restricted days, so the contrast was never true. That leaves Statement II, which you can only settle by knowing RBI's charge rules. Remember that inward transactions are free in both RTGS and NEFT, and banks may charge only for outward RTGS. There is also a quick logic check. RBI has spent years cutting charges to push digital payments, so a rule that charges people for receiving money would run against that policy.
Know more
RTGS and NEFT are both payment systems run by the Reserve Bank of India. IMPS and UPI are run by NPCI. The main difference is how payments are settled.
- Gross vs net settlement: RTGS settles every payment on its own, continuously, on RBI's books. Settlement is final and irrevocable once done. NEFT collects payments into half-hourly batches. At each batch it works out the net position between banks and settles only that net figure (Deferred Net Settlement).
- Why it matters: gross settlement removes settlement risk for large payments, but banks need more liquidity. Net settlement uses less liquidity, so it suits retail payments.
| Feature | RTGS | NEFT |
|---|---|---|
| Settlement | Real-time, gross, one by one | Half-hourly batches, deferred net |
| Minimum amount | ₹2 lakh | No minimum |
| Maximum amount | No limit | No limit (₹50,000 for cash-based remittance by non-account holders) |
| Availability | 24x7x365 since 14 Dec 2020 | 24x7x365 since Dec 2019 |
| Inward charges | Free | Free |
| Outward charges | Up to ₹25 + tax (₹2–5 lakh); up to ₹50 + tax (above ₹5 lakh) | Free for online transfers from savings accounts since 1 Jan 2020 |
| Operator | RBI | RBI |
Policy track: RBI waived its processing charges on banks for RTGS and NEFT from 1 July 2019 so that banks would pass the benefit on to customers. Both systems became round-the-clock under RBI's push for digital payments. With RTGS available 24x7, India joined a small group of countries running large-value payment systems round the clock.
Exam trap: UPSC often swaps attributes between the two systems (minimum amount, batch vs real-time, operator). It may also invent differences in charges or timings that no longer exist.
NCERT Concepts to Revise
- Real Time Gross Settlement: Statement I turns on what 'real time' and 'gross' mean in RTGS settlement.
- National Electronic Funds Transfer: All three statements compare NEFT's settlement method, charges and hours against RTGS.
- Payment system: Separating clearing from settlement explains why batch processing and real-time processing differ.