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RBI Waive Off NEFT and RTGS Payment Charges; A Step to Increase Digital Transactions

Reserve Bank of India (RBI) has announced to remove all the current charges which were applicable on the money transfer is done through Real – Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT). The decision has been taken to provide an impetus to the digital fund movement. Before this announcement, banks normally charged anywhere between Rs.30 to Rs.55 for a single RTGS transaction, while the charges for NEFT transaction could go up to Rs. 20.

What is Digital Transaction?

A way of making any payment through digital mode is called digital transaction, which can be also called electronic payment. In such payment no hard cash is required, both payer and payee use digital mode for sending and receiving the money. Digital payments are an instant and convenient way of making payments. These transactions are automated where no paper is used. Examples of such payments are –Debit card, mobile wallets, digital payment apps, Unified payment interface (UPI), and bank repaid cards etc.

What are the Modes of Digital Transactions?

Govt. of India with the vision to transform India into a digitally empowered society, started the programme “Digital India‘’. Faceless, paperless and cashless is the professed role of Digital India. Working on this ideology our govt. has come up with various modes for the digital transaction which are,

Banking Cards, USSD, AEPS, UPI, Mobile Wallets, Banks Pre Paid Cards, Point of Scale, Internet Banking, Mobile Banking and Micro ATM’s. These are the modes which are generally used for digital transactions, but most widely and commonly known mode of digital transaction is RTGS and NEFT. These both systems are maintained by Reserve bank of India. It is applicable for the transfer of money within India.

What is Real Time Gross Settlement (RTGS)?

Under RTGS, the fund transfer takes place on a real time basis or in the simple way we can at the time of request received. RTGS is one of the fastest internet banking facility available through banking channels in India. The beneficiary bank will credit the recipient account within 30 minutes of receiving the fund transfer message. One thing which has to be kept in mind while doing RTGS that, the fund’s settlement takes place in the books of RBI; the payments are final and irrevocable. RTGS is meant for the large value transaction. There is no upper limit for the RTGS transaction, the minimum amount to be remitted through RTGS is 2 lakh. The RTGS service for customers is available from 9:00 hours to 16:30 hours for weekdays and the Saturday timings are 9:00 hours to 14:00 hours. 

What is National Electronic Funds Transfer (NEFT)?

NEFT is a nationwide payment system facilitating one to one fund’s transfer. NEFT operates on a deferred net settlement basis and settles transactions in batches. The settlement takes place on an hourly basis. Timings for weekdays are 9:00 hours to 19:00 hours and for Saturday it is 9:00 hours to 13:00 hours. However, there is no fixed minimum or maximum ceiling for NEFT transaction. Even single Rs. 1 also can be transferred through NEFT.

Advantages of Digital Transactions

• Easy and convenient:

Such payments are easy and convenient. Individual need not to carry hard cash with him. UPI apps and E-wallets made digital payments easy, only aadhaar number or card or mobile number is enough to make transactions.

• Pay or send money at anytime

There is no time limit for digital transaction, even at the midnight individual can send or can receive money, the best advantage of digital transaction.

• Discount from Taxes

Govt. has announced various exemptions on taxes to encourage digital transactions. For example, on the payment of Rs.2000, govt. provides full exemptions on service tax. 0.75% discount on fuel and 10% discount are provided on insurance premium of govt. insurers. 

• Written Record

On every transaction, the individual is not required to maintain any separate record. The automatic passbooks inside these E-wallets or app maintain the entire record, track every transaction and can be accessed at any time.

The requirement for NEFT AND RTGS Transaction

There are few details which are required for the transaction through NEFT and RTGS;

• The amount that needs to be transferred
• Amount Number to be debited
• Name of beneficiary bank and branch
• IFSC number of the receiving bank branch
• Name of the beneficiary customers
• Account Number of beneficiary customers

Charges Applicable on the transaction before the RBI Waive off of transaction charges decision

As both RTGS and NEFT system of the online transaction are maintained by RBI, so it has not levied heavy charges over the transaction and according to RBI, banks cannot charge for inward remittance or on receipt of funds.  But for the outward transaction, it has implied charges, varies from the amount to amount need to be transferred. For NEFT transfer customer has to pay from Rs.5 to 25. Banks can not charge more than Rs. 5 for any transfer upto1 lakh, Rs. 15 for 1 to 2 lakhs and Rs.25 for that above Rs.2 lakh. Charges for RTGS transaction, Rs.25 for Rs.2 to Rs.5 lakh and Rs.50 for any amount above Rs. 5 lakh.

Removal of NEFT and RTGS Payment Charges

In order to boost the online transaction, RBI^[1] has decided that with effect from July 2019, all the processing charges levied on the fund transfer through RTGS and NEFT. It has been advised to the banks to pass the benefits to their customers for undertaking transactions using RTGS and NEFT system. This directive as been passed under section 10(2) read with section 18 of the payment and settlement system act 2007.

According to RBI, this decision will help to increase the online transaction and the goal for digital India can be achieved by taking such small steps. This decision will especially benefit the small traders who deal in small value transaction and operate on small margins and for whom every penny counts.

Conclusion

In the direction of making India a digitalized nation, waiving off the processing charges for the transfer of fund through the mode of RTGS and NEFT is an appreciable decision of RBI. These modes of funds transfer are faster than any other offline way of money transfer like cheques and demand draft. This can be expected that after this decision, more customers would prefer online transaction as it is more convenient, fast process for any money transfer and now there will be no charges for transaction also.

There will be transparency in the money transaction cycle in the nation and can keep an eye over the black money holders. This can be considered as a good initiate from RBI in order to achieve its goal for making India Faceless, cashless and paperless. Society is changing drastically and everyone wants hassle-free life, simplicity and ease. Hence, we can say that digital payment is one of the biggest innovations in the field of fund transactions and are the future of digital transactions. Every little step or any decision to encourage digital transactions will help the nation to achieve its‘ target of a cashless society.

Read our article:The Future of ATMs in the era of Digital Banking