EFT vs RTGS: Difference and Comparison

EFT (Electronic Funds Transfer) and RTGS (Real-Time Gross Settlement) are both electronic payment systems used for transferring funds between bank accounts. EFT involves the batch processing of transactions, which may take several hours or even days to complete, depending on the system and the banks involved. In contrast, RTGS allows for immediate, real-time settlement of transactions, making it ideal for high-value and time-sensitive transfers where funds are moved individually and settled instantly. RTGS systems are used for large financial transactions between banks or financial institutions due to their speed and security.

Key Takeaways

1. EFT (Electronic Funds Transfer) is a generic term for electronic money transfers between bank accounts; RTGS (Real-Time Gross Settlement) is a specific system for high-value, time-sensitive fund transfers.
2. EFT transactions can include various types and amounts of transfers; RTGS transactions involve immediate settlement and require a minimum transaction amount.
3. EFT and RTGS facilitate electronic fund transfers, but RTGS is designed for larger, urgent transactions and offers faster settlement times.

EFT vs RTGS

EFT and RTGS differ because an EFT transaction is settled individually on any amount, and there is no minimum value. In contrast, RTGS transactions focus on a significant amount of weight and are paid in real time.

Electronic Fund Transfer (EFT) is a settlement scheme under which the settlements happen in a batch process at the end of the day. Real-Time Gross Settlement (RTGS) As the name indicates, a real-time payment in RTGS is made.

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Comparison Table

Feature	EFT (Electronic Funds Transfer)	RTGS (Real-Time Gross Settlement)
Definition	A system for electronically transferring funds between bank accounts.	A system for immediate and continuous settlement of electronic fund transfers.
Speed	Varies, but typically within a few hours or the next business day.	Instantaneous (funds are transferred and available within seconds).
Minimum Transfer Amount	No minimum limit, but some banks may have limitations.	Typically much higher minimum limit (e.g., ₹2 lakhs in India).
Maximum Transfer Amount	No maximum limit.	No maximum limit, but banks may have internal limits.
Suitable for	Small and medium-sized transactions, recurring payments, individual transfers.	Large and urgent transactions, high-value payments, time-critical transfers.
Cost	Generally lower fees compared to RTGS.	May involve higher fees due to guaranteed and faster settlement.
Availability	Available during banking hours and on designated working days.	Available during specific time windows (e.g., 9:00 AM to 4:30 PM in India) on working days.
Examples	Sending money to a friend, paying bills online, transferring salary.	Making large interbank transfers, bulk payments to vendors, high-value investments

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What is EFT?

Transferring money from one bank account to another in an electronic mode is called Electronic Fund Transfer. The bank accounts may belong to the same or different banks.

Electronic Fund Transfer is also done through the ACH network. Electronic Funds Transfer is secured because of PIN (Personal Identification Number) and the login details, which are known only to the customer.

Also, the manual intervention of someone depositing the cheque and its clearance is avoided. There are significantly fewer administrative procedures, saving time and energy.

There are many ways to transfer money electronically; EFT includes Direct deposit, Wire transfers, ATMs, Debit cards, Electronic checks, Pay-by-phone systems and online banking.

Usually, you cannot stop an EFT payment after initiating it; if you need to stop payment or refund the amount, it’s between you and the person paid. However, we might be able to control scheduled costs, such as utility bills and recurring by notifying the financial institution to begore three business working days.

Before initiating EFT, payment or using it, check with the bank or financial institution for policies, stop payment details, applicable charges for each transaction, minimum and maximum amount and business hours of the transaction.

 

What is RTGS?

RTGS is one of the fund transfer systems which facilitates the real-time transfer of funds. RTGS is considered to be the fastest fund transfer method offered by banks.

It is an instant transfer, and the bank that is supposed to receive the funds from the remitting bank has it remitted in seconds. The bank is expected to deposit the funds within 30 minutes of the transfer message.

RTGS also allows setting up the transfer at a later point in time. The value date of the transaction shall be analysed, and the transfer will be made from the queue.

There may be rare cases of funds not getting credited to the said account. In such cases, the funds shall reach the remitting bank.

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Main Differences Between EFT and RTGS

1. The main difference between EFT and RTGS is that EFT is based on net settlement, meaning that the transactions are completed in batches at specific times, and all transfers will be held up until a particular time. At the same time, RTGS is real-time and happens individually.
2. EFT involves smaller value transactions; the maximum amount can be 2 Lakhs INR. At the same time, RTGS’ minimum transaction value starts from 2 Lakhs INR.
3. The process of EFR is one working day, while RTGS processes in real-time (‘push’ transfer) EFT is slower, with fewer transaction charges than RTGS.
4. EFT is best for small-value transactions, and RTGS is appropriate for many transactions.
5. EFT takes time to transfer funds, depending on the bank’s transaction timelines, but RTGS is an instant fund transfer mechanism.

References

1. http://www.ijrra.net/Vol2issue3/IJRRA-02-03-26.pdf
2. https://krishikosh.egranth.ac.in/handle/1/5810055874