Banking Awareness
The Payment System in India
Shikha Adya
November 2, 2015

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In Banking, the online payment system is a very important concept from the examination point of view. The Payment system in India usually offered by Banks for online money transfer in inter or intra Banks within the country. 

RBI has given a huge list of Banks which are offering Online money transfer facilities. Before going on the concept of the Online Payment system, understand IFSC.

Indian Financial System Code (IFSC)

IFSC is an alphanumeric code that identifies the bank branches. It usually has 11 digits- 1st four represent bank code, 5th reserved as control code and the remaining 6 are of branch code.Let’s see how you can transfer funds online…. There are two basic modes of Payment:

RTGS: (Real Transfer Gross Settlement System)

RTGS is a funds transfer mechanism for the transfer of money from the one bank to another bank on a the basis of real and gross time transfer. This is one of the quickest mode of money transfer system offered by banking channels working in real time implies transaction don’t take any extra waiting period than given. It is an electronic payment settled on a gross or individual basis without meeting the debits against credits. The payment so afflicted are final and irrevocable settlement in doing in the books of the central bank-the ultimate liquidity depository of the country.


The RTGS system allows transfer of funds across the banks on the nearly instantaneous basis. Each participant bank will be required to open a dedicate stellem, into account or putting through its RTGS transactions. Not only does it allow the transfer if funds, it also reduces the credit risk. Both the customer and banks can transfer money the same day in various cycles, compared with the other negotiable instruments that takes one or two days of clearance.


The RTGS system is meant for large transactions of 2 lacs and above. There is no upper ceiling for RTGS transactions. In RTGS, RBI acts as the settlement agent between the banks. The whole transfer and systemic risk are minimized because of RTGS. Credit is to be available within 2 hours.

RBI Settlement Timings:

For transactions, The RTGS service is available from 9.00 hours to 16.30 hours on working days (Monday to Friday) and on Saturday, there are 9.00 hours to 14:00 hours available. Although RBI timings are fixed, but the timings of banks and its branch may vary relying on the scheduled timings of the bank.

NEFT : (National Electronic Fund Transfer)

NEFT is introduced by RBI often called ‘The Reserve Bank of India National Electronic Funds Transfer system’ another name of the ‘NEFT system’. The transaction under the system may be made for amounts inclusive of a paisa component when there is no upper value limit for putting through an individual NEFT transaction.


The system facilities an efficient, secure, economical, reliable and expeditious system of funds transfer and clearing in the banking sector. The NEFT system also relieves the stress on the existing paper based funds transfer and clearing system. The remitting branch prepares a structured financial messaging solution (SFMS) message and send it to its services center for NEFT. In the clearing center, the RBI usually classifies the transactions based on banks and get ready with the list of final credit or debits in order to hand over to the participating banks.


NEFT is a nationally used payment system that aid every person, business firm and corporate bodies to transfer funds electronically from any bank branch to any person, business firm and corporate bodies possess an account with any other branch within the country. In NEFT, there is no minimum and maximum limit is mentioned for a transaction.

RBI Settlement Timings:

For NEFT, there are twelve settlements available from 8 am to 7 pm on weekdays (Monday to Friday) and left six settlements from 8 am to 1 pm on Saturdays.


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