NEFT transfers to take half hour as RBI cuts clearance time; should you just IMPS?

In a move to boost electronic payment system, Reserve Bank of India (RBI) has cut clearance time for National Electronic Funds Transfer (NEFT). 

The bank announced this in its first bi-monthly monetary policy for financial year 2017-18 on Thursday April 6, 2017. 

RBI said, “In line with the document on Vision – 2018 for Payment and Settlement System, the NEFT settlement cycle has reduced for hourly batches to half hourly batches.”

BP Kanungo Deputy Governor of RBI said, “Consequently, 11 additional settlement batches will be introduced at 8.30 am onwards, taking the total number of half hourly settlement batches during the day to 23.”

He said such will enhance the efficiency of NEFT system and add to customer convenience. 

"Starting batch at 8 am and closing batch at 7 pm shall remain the same and the return discipline will also remain the same, that is B+2 hours (settlement batch time plus two hours) as per the existing practice, said RBI.

But does it really matter, a reduce in clearance time of NEFT transaction by half hour, considering there are other portals that serve you better while making a transaction. 

Unlike NEFT, the Immediate Payment Service (IMPS) is a facility that is opened 24X7 for anyone holding a bank account. 

When a fund transfer is initiated by a person using IMPS, the initiator bank sends a message to IMPS, which debits the money and sends it to the receiving account.

All this procedure happens within 5 – 10 seconds. However, maximum amount that a person can send through this portal is up to Rs 2 lakh in a day.

In NEFT, money can be transferred between 8 am to 7 pm on weekday (Monday to Friday) and between 8 am to 1 pm on only Saturdays. On weekday, a person can make 12 settlements while only six settlement is available for him/her on Saturdays.

As fund transfer takes place in batches under NEFT, there are high possibility of delay in money transfer. There are no minimum or maximum limit for NEFT money transfer per day, however, cash remittances will be restricted to a maximum of Rs.50,000/- per transaction.

Transaction charges: 

When you make a transaction using NEFT for amounts up to Rs 10,000 you will be charged Rs 2.5 (exclusive of taxes) per transaction. Amounts from Rs 10,001 to Rs.1 lakh - Rs 5 (exclusive of taxes) per transaction.  Amounts above Rs 1 lakh up to Rs 2 lakh - Rs. 15 (exclusive of taxes) per transaction.

In case of IMPS, for transferring money, banks charges Rs 5 for amounts up to Rs 1 lakh and Rs 15 for amounts above Rs 1 lakh and up to Rs 2 lakh. However, these charges can change as per banks circumstances. 

Performance

In terms of volume, transactions in NEFT rose to 186.7 million volumes in March 2017 from 166.3 million volumes in December 2016.  While IMPS increased to 67.4 million transaction from 52.8 million transaction in December 2016. 

On value basis, transactions via NEFT stood at Rs 11,53,760 crore in December, Rs 11,35,510 crore in January 2017, Rs 10,87,790 crore in February have reached at Rs 16,29,450 crore by end of March 2017. 

Transaction via IMPS stood at Rs 43,190 crore in December 2016, Rs 49,120 crore in January 2017, Rs 48, 220 in February 2017 have now crossed to Rs 56, 470 crore. 

During the period of demonetisation, NEFT transaction has increased from Rs 8,80,780 crore in November 2016 to Rs  Rs 11,53,760 crore in December 2016. 

While IMPS transaction rose from Rs 32,480 crore in November 2016 to Rs 43,190 crore in December 2016. 

From December 2016, IMPS has grown by 28% in terms of volume in March 2017 while NEFT has increased by 12% in March month. 

One of the reason for PM Narendra Modi-led government to announce demonetisation drive was to make-India a less cash economy. 

A Visa study said when demonetisation was announced, "India can save up to Rs 70,000 crore in the next five years by taking measures to reduce cash handling by widening digital transactions base, global payments gateway."