Question 4 from UPSC CSE 2025 - Economics

Question

Consider the following statements in respect of RTGS and NEFT:
I. In RTGS, the settlement time is instantaneous, while in NEFT it takes some time to settle payments.
II. In RTGS, customers are charged for inward transactions, while that is not the case for NEFT.
III. Operating hours for RTGS are restricted on certain days, while this is not true for NEFT.
Which of the statements given above is/are correct?

IASCODEX · Accepted Answer

Correct Option: A. I only

Strategy: Focus on the functional distinction between RTGS (instant settlement) and NEFT (deferred, batch processing). Immediate elimination of Statement II by recalling RBI guidelines: inward RTGS is free for customers. Statement III contradicts the current 24x7x365 operational status of both systems, whereas previously there were restrictions on RTGS hours. Only Statement I is accurate under current RBI rules.

Key Info: RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer) are both electronic funds transfer systems regulated by the Reserve Bank of India (RBI).

- RTGS enables instant, real-time settlement of transactions, meaning each transaction is processed individually at the moment it is initiated, with no waiting period or netting.
- NEFT processes fund transfers in batches at regular intervals throughout the day; settlement is thus not instant but occurs at set intervals (currently half-hourly batches).
- Inward RTGS transactions (funds credited to the recipient's account) are free for customers as per RBI directive; banks may levy charges only on outward transactions, subject to RBI-mandated caps.
- As of December 14, 2020, RTGS operates 24x7x365, removing previous restrictions on operating hours. NEFT has also been available 24x7x365 since December 2019.
- RTGS is mainly used for high-value transactions (minimum ₹2 lakh, no upper limit), while NEFT caters to all values (no minimum or maximum).
- RBI is the central regulatory authority for both payment systems.
- Both systems have contributed significantly to India's push towards a digital, real-time payments infrastructure.

IASCODEX · Answer

Option B: I and II

IASCODEX · Answer

Option C: I and III

IASCODEX · Answer

Option D: III only