National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) are the two most popular and convenient money transfer methods used by people. In NEFT payment system, the settlement of funds takes place in half-hourly batches, while in RTGS, transfer of funds happens in real-time settlement. Although both are convenient channels to transfer money to beneficiaries, at times the transfer does not go through due to various reasons.
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So, the next question is will banks pay the penalty in such cases and what is the turnaround time for RTGS and NEFT transactions?
NEFT
There is a provision of a two-hour window in NEFT from the batch settlement before the beneficiary’s account should be credited.
Destination banks are required to return the transaction (to the originating branch) within two hours of the batch in which the transaction was processed if it is not possible to afford credit to the beneficiary’s account for any reason, according to the RBI NEFT FAQ.
NEFT penalty
According to the RBI FAQs on NEFT, “If the NEFT transaction is not credited or returned within two hours after batch settlement, then the bank is liable to pay penal interest to the affected customer at the current RBI LAF Repo Rate plus two percent for the period of delay / till the date of credit or refund, as the case may be, is afforded to the customers’ account without waiting for a specific claim to be lodged by the customer in this regard.”
RBI LAF repo rate is 4.90% + 2%= 6.90% penalty
What happens if RTGS money is not credited to the beneficiary’s account?
Under normal circumstances, the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank must credit the beneficiary’s account within 30 minutes of receiving the funds transfer message, according to the RBI FAQs.
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The amount will be reversed to the sender’s account by originating Bank. RBI states: “If it is not possible to credit the funds to the beneficiary customer’s account for any reason, the funds received by the RTGS member bank will be returned to the originating bank within one hour of receipt of the payment at the Payment Interface (PI) or before the end of the RTGS Business day, whichever is earlier. Once the money is received back by the remitting bank, the original debit entry in the customer’s account needs to be reserved.“
