In a move that gives a big thrust to online fund transfers, the Reserve Bank of India (RBI) announced the removal of charges levied by the Central Bank for transactions processed in the Real Time Gross Settlement System (RTGS) and National Electronic Funds Transfer (NEFT) systems.
The Chief digital officer of a private bank, requesting anonymity, said, “With this, the transactions via RTGS and NEFT would either become free or charges would be further reduced. These days 70-80 per cent of the bank’s transactions are taking place on mobile and internet by the customers. So, this is a positive step by the central bank to boost digital banking transactions.” Banks are required to pass on these waived off / reduced charge benefits on RTGS and NEFT to customers. Detail instructions and clarity in this regard will be issued within a week to the banks by the RBI.
Encouraging digital transfer
Mandar Agashe, Founder and Vice President of Sarvatra Technologies says, “With the waiver of charges on payment modes such as the RTGS and NEFT, the RBI is clearly nudging banks towards increasing digital payments. This is actually a great move for the masses and will go a long way in encouraging digitisation of payments and enhancing financial inclusion. Moreover, RTGS and NEFT are much cheaper modes than other payment mechanisms like cheques in terms of the cost involved in managing end to end transactions until settlement. This move will therefore benefit banks and the entire ecosystem by encouraging more volumes.”
According to the National Payments Corporation of India (NPCI) data, the total number of NEFT outward transactions was 20.34 crore in April 2019, up from 16.74 crore in April 2018. NEFT is a payment system facilitating fund transfers from one bank account to another. One can access this service either by using internet banking or by personally visiting the bank branch. The transfer of the money to the beneficiary account is completed within hours.
Similarly, according to the NPCI data, the total number of RTGS outward transactions in volume terms was 1.14 crore in April 2019, up from 1.06 crore in April 2018. In RTGS mode, high value amounts can be transferred instantly from one bank account to other. The minimum amount that can be currently transferred is Rs 2 lakh.
At present, the RBI levies minimum charges on banks for transactions routed through its RTGS and the NEFT. Banks, in turn, levy those charges on their customers. Now, in order to provide an incentive to digital movement of funds, it has been decided to do away with the charges levied by the Reserve Bank for transactions processed in the RTGS and NEFT systems.
In December 2018, a broad framework of charges was mandated by the RBI for RTGS. According to this framework, for outward transactions of between Rs 2 lakh to Rs 5 lakh, a bank can charge not more than Rs 30 for the transaction. For amounts above Rs 5 lakh, a bank cannot charge in excess of Rs 55 per transaction.
At present, State Bank of India charges Rs 25 for transferring Rs 2-5 lakh and Rs 50 for amounts greater than Rs 5 lakh−if you initiate a transfer by a visiting a branch.
However, SBI charges only Rs 5 to allow transfer of Rs 2-5 lakh by internet banking through RTGS and Rs 10 for amounts greater than Rs 5 lakh. There’s an additional 18 per cent Goods and Services Tax (GST) as well. With effect from June 1, the RBI has extended the timings for customer transactions through RTGS from 4:30 pm to 6:00 pm.
At present, NEFT charges, as mandated by the RBI, range roughly from Rs 2.50 to Rs 25, depending on the amount of money you wish to transfer. Also, at present, SBI charges the same if you visit the branch to initiate a money transfer. But if you transfer money through NEFT using its internet banking, then the charges drop to Re 1 to Rs 5, apart from the 18 per cent GST.
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