The Reserve Bank of India (RBI) has increased the minimum amount that can be transferred through the real time gross settlement (RTGS) facility among bank accounts. In its quarterly review, RBI increased the lower limit to Rs.2 lakh from Rs.1 lakh with effect from 15 November.

Money can be transferred from one bank account to another using RTGS and national electronic funds transfer (Neft) facilities. While RTGS transfers were restricted to high-value transfers of Rs.1 lakh and above, Neft was available for transfers less than Rs.1 lakh.

However, the maximum limit for Neft transfers has now been increased to Rs.2 lakh and the charges for Neft transfers between Rs.1 lakh and Rs.2 lakh have been reduced.

Neft transfer takes a bit longer than RTGS transfer. While RTGS transfers money instantly to the recipient account, Neft system takes a minimum of 3-4 hours to transfer funds.

“The RTGS facility enables a customer to instantly transfer his money and is superior than Neft. Since Neft is a batch transfer, there exists a time lag for the funds to get transferred. But on the other hand, Neft is comparatively cheaper than RTGS,” says K.V.S. Manian, group head-consumer banking, Kotak Mahindra Bank Ltd.

Currently, all banks pay a processing or a service charge to the central bank for electronic fund transfers which are passed on to customers. For fund transfers valued between Rs.1 lakh and Rs.2 lakh, RBI has decreased the service charge from Rs.25 to Rs.15. The fee for fund transfers worth more than Rs.2 lakh remains unchanged at Rs.25.

“By restricting the number of transactions to very high values, the efficiency of RTGS goes up. But for low value transactions, we have not compromised on the efficiency; they can opt for Neft”, said an RBI spokesperson.

These two electronic interbank fund transfer system were introduced in 2004 and have seen a tremendous increase in the number of transactions and value ever since. On an average, the central bank handles around 60,000 RTGS and around five million cheque clearing transactions daily.

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