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Transfer via NEFT, RTGS: What happens if money is not credited to beneficiary account on time, penalty banks have to pay

August 26, 2022


If it is not possible to pay credit to the beneficiary's account for any reason, originating banks must return the transaction (to the originating branch) within two hours of the batch in which the transaction was processed in NEFT.

Money transfer happens through various channels like NEFT, RTGS etc. Although these are convenient routes to transfer money to beneficiaries, there can be times when the transfer does not go through and this can be for various reasons.

Will banks pay the penalty in such cases and what is the turnaround time for RTGS and NEFT transactions?

You can expect a two-hour window in NEFT from the batch settlement before the beneficiary's account should be credited.

 Destination banks are required to return the transaction (to the originating branch) within two hours of the batch in which the transaction was processed if it is not possible to afford credit to the beneficiary's account for any reason, according to the RBI NEFT FAQ.

NEFT penalty
According to the RBI FAQs on NEFT, “If the NEFT transaction is not credited or returned within two hours after batch settlement, then the bank is liable to pay penal interest to the affected customer at the current RBI LAF Repo Rate plus two percent for the period of delay / till the date of credit or refund, as the case may be, is afforded to the customers’ account without waiting for a specific claim to be lodged by the customer in this regard.”

RBI LAF repo rate is 4.90% + 2%= 6.90% penalty

What happens if RTGS money is not credited to the beneficiary's account?
Under normal circumstances, the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank must credit the beneficiary's account within 30 minutes of receiving the funds transfer message, according to the RBI FAQs.

The amount will be reversed to the sender’s account by originating Bank. RBI states: “If it is not possible to credit the funds to the beneficiary customer’s account for any reason, the funds received by the RTGS member bank will be returned to the originating bank within one hour of receipt of the payment at the Payment Interface (PI) or before the end of the RTGS Business day, whichever is earlier. Once the money is received back by the remitting bank, the original debit entry in the customer's account needs to be reversed.”

Compensation for delay in returning the payment
As per the RBI, the original customer is entitled to compensation at the current repo rate plus 2% in the event that there is any delay in returning the unsuccessful payment.
Repo rate: 4.90%
Penalty: 2%
4.90%+2%= 6.90% penalty

Raise complaint
If there is a problem with delay or non-credit to the beneficiary account with RTGS, the customer should get in touch with his or her bank or branch. If the problem is not resolved satisfactorily, a complaint may be sent via email or postal mail to the following address, along with the issue's specifics and the UTR number.
In the case of NEFT, you can go to your bank's grievance department and provide them with the specifics of the disputed transaction. You may file a complaint under "The Reserve Bank-Integrated Ombudsman Scheme (RB-IOS, 2021)" if your issue is not resolved within 30 days. The RB-IOS, 2021 offers customers a single point of contact to make complaints about the specified RBI regulated entities.

[The Economic Times]

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