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Shri Vile Parle Kelavani Mandal’s

C.N.M. School & N.D. Parekh Pre-Primary School
2024 – 25
CLASS
Commerce
XII Banking Trends
Number of printed pages -

1.NEFT:
NEFT stands for National Electronic Funds Transfer. Started in November 2005,
NEFT is an electronic funds transfer system set up and managed by the Reserve
Bank of India. NEFT allows the online transfer of funds from one NEFT-enabled
bank account to another.
Features
The National Electronic Funds Transfer system is one of the various methods of
online money transfer. It is regulated by the RBI and hence, works as per the
guidelines laid down by RBI.
• NEFT is a one-to-one payment facility
• Transactions made through NEFT do not take place in real-time; implying
that it takes a few hours for NEFT transactions to complete
• Before December 2019, RBI had fixed timings during which NEFT
transactions can be processed. Any NEFT transaction will be processed only
between 8:00 AM and 6:30 PM from Monday to Friday, and 8:00 AM to
12:00 PM on Saturdays. However, from 2020, NEFT transactions can be
performed 24*7
• To transfer funds through NEFT, you must add beneficiaries on the internet
banking portal of your required bank
• There are no limits on the amount of NEFT transactions
• There is a fee applicable on all NEFT transactions; the amount varies from
Rs. 2.5 to Rs. 25, depending on the amount being transferred
• As per RBI guidelines, the payments made via NEFT are processed and

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settled in batches of half-hour

Advantages
Among all the other methods of online money transfer, here’s why you can opt for
NEFT (National Electronic Funds Transfer)-
• NEFT makes the transfer of funds easy, convenient and feasible
• All NEFT transactions take place online; hence, there is no involvement of a
third party
• Owing to the involvement of RBI, NEFT transactions are completely safe
and secure
• The receiver and sender of the funds gets notified instantly upon completion
of the transaction
• NEFT does not require cheques or demand drafts while transferring money;
hence, it is economical
• Any account holder, whether an individual, firm or corporate can carry out
NEFT transactions. The only required condition is that the banks of both the
parties must be NEFT-enabled
• Apart from transferring money, you can also use NEFT to pay your loan
instalments, credit card dues, EMIs, etc.
RTGS:
RTGS stands for Real Time Gross Settlement. It is a money transfer system that
allows the transfer of funds from one bank account to another in real time and on a
gross settlement basis. The term, ‘real-time’ implies that transactions through
RTGS are processed right when they are initiated by the sender, and ‘gross
settlement’ means that the instructions regarding the transfer of funds occur on a
one-to-one basis.
Features of RTGS
• Real-time processing: RTGS systems provide immediate and final
settlement of fund transfers. Transactions are processed and settled
individually, without any batching or netting process, ensuring real-time
transfer of funds.

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• Gross settlement: RTGS settles transactions on a one-to-one basis,

meaning each transaction is settled individually and not combined with
other transactions. This ensures that funds are settled without any offsetting
or netting against other payments.
• High-value transactions: RTGS is primarily designed for large-value and
high-priority transactions. There is usually a minimum threshold for
transaction value, and it varies depending on the jurisdiction.
• Instant availability of funds: Once a transaction is processed through
RTGS, the funds become immediately available to the recipient. This
feature makes RTGS suitable for time-sensitive payments, such as interbank
transfers, large business transactions, securities settlements, and government
payments.
• Continuous operation: RTGS systems typically operate continuously
throughout business hours, allowing for transactions to be processed and
settled at any time during operating hours. This ensures efficient and timely
processing of payments.
• Secure and reliable: RTGS systems employ robust security measures to
protect the integrity and confidentiality of transactions. They also have builtin
mechanisms for error detection, correction, and reconciliation to ensure
accuracy and reliability.
• Settlement finality: Once a transaction is settled through RTGS, it is
considered final and irrevocable. This feature provides certainty and reduces
counterparty risk in financial transactions.
• Centralized control: RTGS systems are usually operated and regulated by
a central bank or a designated authority to maintain stability and oversight
over the financial system.
Benefits of RTGS Transactions
RTGS transactions offer several benefits compared to other forms of fund
transfers. Here are some of the key advantages:
• Real-time settlement: RTGS enables immediate and final settlement of

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funds, ensuring instant availability of funds to the recipient. This feature is

particularly beneficial for time-sensitive transactions where immediate
transfer of funds is required.
• High-value transactions: RTGS is designed for large-value payments,
making it suitable for high-priority transactions such as interbank transfers,
corporate payments, and government transactions. It allows for the efficient
and secure transfer of significant amounts of money.
• Reduced settlement risk: RTGS systems provide settlement finality,
meaning once a transaction is processed and settled, it becomes irrevocable.
This reduces counterparty risk and eliminates the possibility of settlement
failures or disputes.
• Accurate and reliable processing: RTGS systems incorporate robust error
detection, correction, and reconciliation mechanisms. This helps ensure the
accuracy and reliability of transactions, minimizing the chances of errors or
discrepancies during the transfer process.
• Improved cash flow management: With RTGS, businesses, and
individuals can manage their cash flow more effectively by having
immediate access to funds. This allows for better liquidity management,
timely payments, and enhanced financial planning.
• Enhanced transparency: RTGS transactions provide clear visibility into
the movement of funds. Participants in the transaction can track and trace
the payment flow, facilitating transparency and accountability in financial
transactions.
• Efficient interbank settlements: RTGS systems play a crucial role in
interbank settlements, enabling smooth and efficient transfer of funds
between banks. This helps maintain the stability and integrity of the
financial system by facilitating timely and secure settlements.
• Support for monetary policy implementation: RTGS systems are often
used by central banks to implement monetary policy measures effectively.
They provide a mechanism for the central bank to manage liquidity, control

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interest rates, and influence the overall money supply within the economy.

Difference Between NEFT and RTGS

Basis NEFT RTGS

Full Form National Electronic Fund Transfer Real Time Gross Settlement
Suitable for Small money transfer Large money transfer
Transaction Done in Slots/ Batches Real Time Basis
settlement Slowly Faster
Transaction Value No minimum or maximum limit Minimum limit Rs. 2 Lakhs & max
limit – Nil]

What is IMPS?
Immediate Payment Service (IMPS) is an instant interbank electronic fund transfer service
through mobile phones. It is also being extended through other channels such as ATM, Internet
Banking, etc
Difference between IMPS & NEFT:
there is a difference between NEFT and IMPS when it comes to the time it takes to complete the
transfer. Unlike NEFT, IMPS is a real-time fund transfer service. The transactions get processed
immediately. On the other hand, the time taken in NEFT is subject to cut-off timings and batches
of the banks.
There is a maximum limit of Rs. 2 Lakh for IMPS transactions whereas there is no upper limit
for NEFT Transactions.
While all three systems allow for electronic funds transfer, IMPS is the fastest and most
convenient for small transactions. Similarly, NEFT is suitable for low-value transactions and
RTGS is ideal for high-value transactions.

SMS Alerts
SMS Alerts means an automated notification service which sends text messages from the Bank to a
mobile phone number provided by you, including Account Alerts and Internet Banking Alerts.
Direct Debit
Regular, fixed payments like rent payments, monthly charity donations or regular payments into a
savings account. Regular payments of variable or fixed amounts like mortgage payments, utility bills
or other bills based on usage.
Direct Credit
Direct credit is a monetary deposit made into the account of any person, business, or other entity,

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mostly using an electronic funds transfer in a faster, easier, and more convenient manner than other
forms of transfer .
Example of a Direct Credit Suppose a company named ABC Corp has 100 employees. On payday,
instead of issuing physical checks or cash to each employee, ABC Corp uses a direct credit system.
This means the company will electronically transfer the salary directly into each employee's bank

Unified Payments Interface (UPI)

A Unified Payments Interface (UPI) is a smartphone application that allows users to transfer
money between bank accounts. It is a single-window mobile payment system developed by the
National Payments Corporation of India (NPCI). It eliminates the need to enter bank d The
Unified Payments Interface is a real-time payment system. It is designed to enable peer-to-peer
inter-bank transfers through a single two-click factor authentication process. The interface is
regulated by the Reserve Bank of India (RBI) , India's central bank. It works by transferring
money between two bank accounts along with a mobile platform.etails or other sensitive
information each time a customer initiates a transaction.
Digital Banking
The Digital Banking definition is banking done through the digital platform, doing away with all
the paperwork like cheques, pay-in slips, Demand Drafts, and so on. It means availability of all
banking activities online.
Starting from savings, transfers, withdrawals, payments, to investments can be made in real-time.
Apart from that, personalization is also the most widely felt benefit of digital banking. Customers
can manage, access, and get banking service offers that best suit their needs.
The 5 benefits of Digital banking
 Check balances on accounts and view records of your transactions.
 Pay bills automatically each month with easy-to-set-up auto payment.
 Transfer funds between accounts.
 Download or print statements for your tax or personal records.
 Access your account 24/7.

E-wallet is a type of pre-paid account in which a user can store his/her money for any future
online transaction. An E-wallet is protected with a password. With the help of an E-wallet, one
can make payments for groceries, online purchases, and flight tickets, among others.
Example ; Paytm e-wallet is convenient for making daily purchases at merchants or online. To
use the wallet, a user simply needs to add funds from a linked bank account and then scan a QR
code provided by the merchant or use the wallet for online transactions.

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