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RTGS NEFT ECS Guide & Transaction return Codes Explained

RTGS NEFT

RTGS NEFT ECS Guide & Transaction return Codes Explained

RTGS NEFT

Hello to all! ( This article is for both bankers and common persons)

Today we are going learn about electronic payment systems i.e RTGS NEFT ECS and RTGS return codes in India.

RTGS System

The acronym “RTGS” stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a “real time” and on “gross” basis. This is the fastest possible money transfer system through the banking channel. Settlement in “real time” means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. “Gross settlement” means the transaction is settled on one to one basis without bunching with any other transaction. Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable.

Transaction limit:-The RTGS system is primarily for large value transactions. The minimum amount to be remitted through RTGS is Rs.2 lakh. There is no upper ceiling for RTGS transactions. No minimum or maximum stipulation has been fixed for EFT and NEFT transactions.

RTGS service window:-The RTGS service window for customer’s transactions is available from 9.00 hours to 15.00 hours on week days and from 9.00 hours to 12.00 noon on Saturdays i.e. to accept the customer transactions for settlement at the RBI during 9.00 hours to 15.00 hours on week days and between 9.00 hours and 12.00 noon on Saturday. However, the timings between these hours would vary depending on the customer timings the branches have. For inter-bank transactions, the service window is available from 9.00 hours to 17.00 hours on week days and from 9.00 hours to 14.00 hours on Saturdays. 

 NEFT System

National Electronic Funds Transfer (NEFT) system is a nation wide funds transfer system to facilitate transfer of funds from any bank branch to any other bank branch.The beneficiary gets the credit on the same Day or the next Day depending on the time of settlement.

 NEFT system operation:-

Step-1: The remitter fills in the NEFT Application form giving the particulars of the beneficiary (bank-branch, beneficiary’s name, account type and account number) and authorises the branch to remit the specified amount to the beneficiary by raising a debit to the remitter’s account. (This can also be done by using net banking services offered by some of the banks)

Step-2: The remitting branch prepares a Structured Financial Messaging Solution (SFMS) message and sends it to its Service Centre for NEFT.

Step-3: The Service Centre forwards the same to the local RBI (National Clearing Cell, Mumbai) to be included for the next available settlement. Presently, NEFT is settled in six batches at 0930, 1030, 1200, 1300, 1500 and 1600 hours on weekdays and 0930, 1030 and 1200 hours on Saturdays

Step-4: The RBI at the clearing centre sorts the transactions bank-wise and prepares accounting entries of net debit or credit for passing on to the banks participating in the system. Thereafter, bank-wise remittance messages are transmitted to banks.

Step-5: The receiving banks process the remittance messages received from RBI and affect the credit to the beneficiaries’ accounts.

RTGS neft ecs

Difference between RTGS and NEFT

EFT and NEFT are electronic fund transfer modes that operate on a deferred net settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place at a particular point of time. All transactions are held up till that time. For example, NEFT settlement takes place 6 times a day during the week days (9.30 am, 10.30 am, 12.00 noon. 1.00 pm, 3.00 pm and 4.00 pm) and 3 times during Saturdays (9.30 am, 10.30 am and 12.00 noon). Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. Contrary to this, in RTGS, transactions are processed continuously throughout the RTGS business hours. NEFT is an electronic payment system to transfer funds from any part of country to any other part of the country and works on net settlement basis, unlike RTGS that works on gross settlement basis. While EFT is restricted to the fifteen centers (only where RBI offices are located), NEFT is a nation-wide electronic fund transfer system.

 Difference between IFSC code and MICR code:-

Indian Financial System Code (IFSC) is an alpha numeric code designed to uniquely identify the bank-branches in India. This is 11 digit code with first 4 characters representing the banks code, the next character reserved as control character (Presently 0 appears in the fifth position) and remaining 6 characters to identify the branch. The MICR code has 9 digits to identify the bank-branch.

Requirements for transaction:-The remitting customer has to furnish the following information to a bank for effecting a RTGS/NEFT remittance:

  1. Amount to be remitted
  2. His account number which is to be debited
  3. Name of the beneficiary bank
  4. Name of the beneficiary customer
  5. Account number of the beneficiary customer
  6. Sender to receiver information, if any
  7. The IFSC code of the receiving branch( The beneficiary customer can obtain the IFSC code from his branch)

Electronic Clearing Service-(ECS)

Electronic Clearing Service (ECS): It is a mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. Utility companies like telephone, electricity, for loan installments of financial institutions/banks use this facility effectively. There are two types of ECS called ECS (Credit) and ECS (Debit).

ECS (Credit) is used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment.

ECS (Debit) is used for raising debits to a number of accounts of consumers/ account holders for crediting a particular institution.

 ECS Credit System:-

AECS payments can be initiated by any institution (called ECS user) who have to make bulk or repetitive payments to a number of beneficiaries. They can initiate the transactions after registering themselves with an approved clearing house. ECS users have also to obtain the consent as also the account particulars of the beneficiary for participating the ECS clearings.

The ECS user’s bank is called as the sponsor bank under the scheme and the ECS beneficiary account holder is called the destination account holder. The destination account holder’s bank or the beneficiary’s bank is called the destination bank. The beneficiaries of the regular or repetitive payments can also request the paying institution to make use of the ECS (Credit) mechanism for effecting payment.

The ECS users intending to effect payments have to submit the data in a specified format to one of the approved clearing houses. The list of the approved clearing houses or the list of centres where the ECS facility has been provided is available at www.rbi.org.in.

The clearing house would debit the account of the ECS user through the account of the sponsor bank on the appointed day and credit the accounts of the recipient banks, for affording onward credit to the accounts of the ultimate beneficiaries.

The beneficiary has to furnish a mandate giving his consent to avail of the ECS facility. He should also communicate to the ECS user the details of his bank branch and account particulars. Such authorisation form is called a mandate.

Advantages to  beneficiary:

  • The ultimate beneficiary need not make frequent visits to his bank for depositing the physical paper instruments.
  • He need not apprehend loss of instrument and fraudulent encashment.
  • The delay in realisation of proceeds after receipt of paper instrument is obviated.
  • The ECS user saves on administrative machinery for printing, dispatch and reconciliation.
  • Avoids chances of loss of instruments in postal transit.
  • Avoids chances of frauds due to fraudulent access to the paper instruments and encashment.
  • Ability to make payment and ensure that the beneficiaries’ account gets credited on a designated date.

Advantages to the banks:

  • Banks handling ECS get freed of paper handling.
  • Paper handling also creates lot of pressure on banks as they have to encode the instruments, present them in clearing, monitor their return and follow up with the concerned bank and customers.
  • In ECS banks simply get the payment particulars relating to their customers. All they need to do is to match the account particulars like name, a/c number and credit the proceeds.
  • Wherever the details do not match, they have to return it back, as per the procedure.

ECS Debit system:-

It is a scheme under which an account holder with a bank can authorise an ECS user to recover an amount at a prescribed frequency by raising a debit in his account. The ECS user has to collect an authorisation which is called ECS mandate for raising such debits. These mandates have to be endorsed by the bank branch maintaining the account. Any ECS user desirous of participating in the scheme has to register with an approved clearing house. The list of approved clearing houses is available at RBI web-site www.rbi.org.in. He should also collect the mandate forms from the participating destination account holders, with bank’s acknowledgement. A copy of the mandate should be available with the drawee bank.

The ECS user has to submit the data in specified form through the sponsor bank to the clearing house. The clearing house would pass on the debit to the destination account holder through the clearing system and credit the sponsor bank’s account for onward crediting the ECS user. All the unprocessed debits have to be returned to the sponsor bank within the time frame specified. Banks will treat the electronic instructions received through the clearing system on par with the physical cheques.

 Advantages to beneficiary:

  • Trouble free- eliminates the need to go to the collection centres / banks by the customers and no need to stand in long ‘Q’s for payment
  • Peace of mind- Customers also need not track down payments by last dates.
  • The debits would be monitored by the ECS users.
  • The ECS user saves on administrative machinery for collecting the cheques, monitoring their realisation and reconciliation
  • Better cash management.
  • Avoids chances of frauds due to fraudulent access to the paper instruments and encashment.
  • Realise the payments on a single date instead of fractured receipt of payments.

 Advantages to the banks:

  • Banks handling ECS get freed of paper handling.
  • Paper handling also creates lot of pressure on banks as they have to encode the instruments, present them in clearing, monitor their return and follow up with the concerned bank and customers.
  • In ECS banks simply get the mandate particulars relating to their customers. All they need to do is to match the account particulars like name, a/c number and debit the accounts.
  • Wherever the details do not match, they have to return it back, as per the procedure.

 Can the mandate given once be withdrawn or stopped? Yes. The mandate given is on par with a cheque issued by a customer.

RTGS NEFT  Return Codes

Whenever you make a fund transfer using NEFT and RTGS, if the amount is not credited to the beneficiary it will be returned to your account.
The most common NEFT Return codes are:
R03 – Account Not found.
The amount will be returned with code R03, if the beneficiary bank cannot find the account due to wrong account number or invalid account number.
eg. NEFT-RETURN-<OriginalTrn ID>-R03.
R12 – Credit to NRI account.
NRI account accept only foreign exchange. The amount will be returned with the code R12, if you try to transfer INR (Indian Rupees) to NRI account,
eg NEFT-RETURN-<OriginalTrnID>-R12Other Return CodesR01 – Account ClosedR04 – Account Type Mismatch, Account Type not foundR05 – Beneficiary Name MismatchR09 – Operation Suspended

R11 – Any other reason. Contact Branch for details.

Thank you and welcome!

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Article Name
RTGS NEFT ECS Guide & Transaction Codes Explained
Description
RTGS NEFT ECS EFT Guide & Transaction Codes Explained Real time gross settlement, national electronic fund transfer, ecs mandate etc difference between RTGS and NEFT
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