Reserve Bank proposes 24×7 NEFT money transfer

Mains Paper 3 : issues relating to planning, mobilization of resources |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NEFT, RTGS, IMPS

Mains level : Promoting digital transactions in India


News

  • The RBI has proposed to examine the possibility of extending availability of National Electronic Funds Transfer (NEFT) round-the-clock on all the seven days of the week — 24×7 basis — to facilitate beyond the banking hour fund transfer.
  • Besides, the central bank will also examine the possibility of extending the timings for Real Time Gross Settlement (RTGS) transactions.

What are NEFT and RTGS?

I. NEFT

  • NEFT is an electronic funds transfer system maintained by the Reserve Bank of India (RBI).
  • Started in November 2005, the setup was established and maintained by Institute for Development and Research in Banking Technology (IDRBT).
  • NEFT enables bank customers in India to transfer funds between any two NEFT-enabled bank accounts on a one-to-one basis. It is done via electronic messages.
  • Unlike Real-time gross settlement (RTGS), fund transfers through the NEFT system do not occur in real-time basis.

II. RTGS

  • RTGS are specialist funds transfer systems where the transfer of money or securities takes place from one bank to any other bank on a “real time” and on a “gross” basis.
  • Settlement in “real time” means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed.
  • “Gross settlement” means the transaction is settled on one-to-one basis without bundling or netting with any other transaction.
  • “Settlement” means that once processed, payments are final and irrevocable.

What are the current limits?

  • Customers can transfer anywhere between Rs 1 and Rs 25 lakh via NEFT (for HDFC Bank; varies from bank to bank) through net banking in a day.
  • Through RTGS, they can transfer between Rs 2 lakh and Rs 25 lakh through net banking in a day.
  • However, as of now, these online transactions are not available on Sundays, on the second and fourth Saturdays of every month and on bank holidays.
  • On working days, NEFT is available between 8 am and 7 pm (varies from bank to bank) except on working Saturdays (8 am and 1 pm) and hence they restrict customers’ ability to carry out such transactions.
  • Online RTGS transactions are available for lesser hours. It can be done till 4 pm (varies from bank to bank).

Current options available

  • Customers can currently transfer money through Immediate Payment Service (IMPS) round the clock but the maximum amount allowed is Rs 2 lakh.
  • If RBI makes NEFT 24×7, it will not only ease the fund transfer for customers round the clock but will also take some load-off the bank branches for executing such transactions.
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