How money moves: UPI, NEFT, RTGS
What happens between pressing 'pay' and the money reaching the other account, and how cheques fit in today
Payment figures for August 2026; rules as on 12 October 2026
Verified 12 October 2026
For training and education only. Not investment advice.
Trainer notes
Ask the room: when you send ₹500 from your phone, what moves? Most will say 'the money'. Keep that answer for slide 2. No cash moves; two account balances change.
When you pay someone, no notes travel. Banks change two balances, then settle with each other.
How fast that happens depends on the system used. India's main systems are run by the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI).
Trainer notes
The payer's bank reduces one balance and the payee's bank raises another. The two banks then owe each other, and they square up through a payment system. The systems differ in how and when that squaring up happens.
Four ways money moves between banks
- UPI
From a phone
Instant payment through a phone app, round the clock. Run by NPCI. Usually up to ₹1 lakh a payment.
- NEFT
In batches
Round the clock, in half-hourly batches. Run by RBI, which sets no limit on the amount.
- RTGS
One by one
Each payment settles on its own, at once. Run by RBI. Minimum ₹2 lakh, with no upper limit.
- CTS
Cheques
Cheque Truncation System. An image of the cheque goes to the clearing house, not the paper.
Take-away: In full: Unified Payments Interface, National Electronic Funds Transfer, Real Time Gross Settlement.
Sources: RBI FAQs on NEFT (2 Sep 2024) and RTGS (31 Oct 2022); NPCI UPI FAQs; PIB note on UPI, 24 Aug 2026; RBI circular of 13 Aug 2025 on CTS.
Trainer notes
There are other systems too, such as IMPS (Immediate Payment Service), cards and NACH for bulk debits and credits. A bank may set its own lower limits on any of these.
Settling one by one, or netting
TWO BANKS, 30 MINUTES
Customers of Bank A send ₹50 crore to customers of Bank B.
Customers of Bank B send ₹42 crore to customers of Bank A.
All figures are assumed.
- Gross, as in RTGS: each payment settles on its own as it arrives. In all, ₹50 crore + ₹42 crore = ₹92 crore moves between the two banks.
- Net, as in an NEFT batch: payments are added up first. Only the difference moves: ₹50 crore − ₹42 crore = ₹8 crore, from Bank A to Bank B.
- The customers are paid in full either way: ₹50 crore to Bank B's customers and ₹42 crore to Bank A's.
- Netting needs less money to move between the banks. But the batch has to close before it can settle.
Result: Gross settlement is immediate, payment by payment. Net settlement waits for the batch to close.
Illustration with two invented banks and assumed figures. Real batches net the payments of many banks at once.
Trainer notes
Banks keep accounts with RBI, and settlement happens in RBI's books. RBI's RTGS FAQ describes RTGS as settlement 'individually on a transaction-by-transaction basis (without netting)'. RBI's circular of 8 May 2017 says NEFT settles 'on net basis'.
UPI, NEFT and RTGS side by side
| UPI | NEFT | RTGS | |
|---|---|---|---|
| Run by | NPCI, which RBI regulates | RBI | RBI |
| How a payment is handled | Instantly, one at a time | In batches every half hour, 48 a day, netted between banks | One at a time, at once, without netting |
| Amount | Usually up to ₹1 lakh; higher for some categories, such as ₹5 lakh for tax | No limit set by RBI; a bank may set its own | Minimum ₹2 lakh; no upper limit |
| Credit to the payee | Instant | Within two hours of the batch settling | Within 30 minutes of the payee's bank getting the message |
| Open round the clock | Yes | Yes, since 16 December 2019 | Yes, since 14 December 2020 |
Sources: RBI FAQs on NEFT (2 Sep 2024) and RTGS (31 Oct 2022); RBI circular of 6 Dec 2019; NPCI UPI FAQs; PIB, 'UPI: Transforming India's Payment Landscape', 24 Aug 2026.
Trainer notes
RTGS is meant mainly for large payments, which is why it has a ₹2 lakh minimum. A bank may set its own limits within these rules, and may charge for some transfers within caps set by RBI; online NEFT from a savings account carries no charge since 1 January 2020. UPI limits for particular categories are set by NPCI circulars and change from time to time.
What happens in a UPI payment
You name the payee
Scan a QR code or enter the payee's UPI ID. The app shows the payee's name before you pay.
You approve with a PIN
The UPI PIN is a code you set yourself. Entering it authorises the payment from your account.
Two balances change
Your bank reduces your balance and the payee's bank raises theirs, at once, at any hour of any day.
The banks settle up
NPCI nets what the banks owe each other and settles it in their accounts with RBI.
Take-away: Never share a UPI PIN with anyone, including a caller who claims to be from the bank.
Source: NPCI, UPI FAQs (opened 12 Oct 2026); RBI circular of 30 Dec 2024 (UPI lets the payer verify the payee's name before paying).
Trainer notes
A UPI ID is an address such as name@bank that stands in for the account number. Step 4 is a simplified description: customers are credited at once, and the banks settle among themselves in cycles set by NPCI. A PIN is entered to pay, so a request to enter a PIN in order to 'receive' money is a warning sign.
Cheques: the image travels, not the paper
Truncation
The bank where a cheque is deposited scans it and sends the image to the clearing house, which passes it to the paying bank. The paper stops there.
Cleared within the day
Since 4 October 2025 cheques are cleared continuously. The paying bank must say yes or no by 7:00 pm, or the cheque is treated as approved.
The next step is on hold
A plan to cut the reply time to three hours from 3 January 2026 was postponed by RBI on 24 December 2025, until further notice.
Source: RBI circulars of 13 August 2025 and 24 December 2025 on continuous clearing and settlement on realisation in the Cheque Truncation System.
Trainer notes
The 'paying bank' is the bank on which the cheque is drawn. Cheques are presented from 9:00 am to 3:00 pm (timing revised in December 2025). Settlement runs every hour, and the depositor's bank must release the money immediately, and not later than one hour after settlement, subject to usual safeguards. No new date for the three-hour stage had been announced as on 12 October 2026.
Many small payments, a few very large
| Share of number of payments (%) | Share of value of payments (%) | |
|---|---|---|
| UPI | 86.98 | 9.92 |
| NEFT | 3.13 | 14.67 |
| RTGS | 0.11 | 68.49 |
| Cheques | 0.15 | 1.93 |
August 2026
- UPI: 2,450.90 crore payments worth ₹29.82 lakh crore.
- NEFT: 88.25 crore payments worth ₹44.09 lakh crore.
- RTGS: 3.15 crore payments worth ₹205.84 lakh crore.
- Cheques (CTS): 4.14 crore worth ₹5.80 lakh crore.
Source: RBI, Payment System Indicators, August 2026. Shares are of total payments: 2,81,787.65 lakh in number and ₹3,00,54,284 crore in value.
Trainer notes
Average size, from the same table: a UPI payment about ₹1,217, an NEFT payment about ₹49,955, an RTGS payment about ₹65.3 lakh. The rest of the total is IMPS, cards, NACH and other systems. These are official payment statistics, not market prices, so the latest month is used.
Why it matters for a fund purchase
A fund unit is bought at a day's NAV (net asset value per unit). Which day depends on the money.
The cut-off
For schemes other than liquid and overnight funds, a purchase gets the day's NAV only if the money is with the scheme by 3:00 pm.
The route
So the time a payment takes can decide the day. Money sent just before the cut-off may reach the scheme after it.
Regular payments
UPI AutoPay lets a payer approve a recurring payment in advance. It is used for SIP instalments, premiums and bills.
Source: SEBI Master Circular for Mutual Funds, 20 March 2026, paras 9.4.2 and 9.4.3; PIB, 'UPI: Transforming India's Payment Landscape', 24 August 2026.
Trainer notes
The rule: NAV is assigned when the application is received and the funds are credited to the scheme's bank account and available for use before the cut-off, whatever the amount. Liquid and overnight funds have an earlier cut-off. Do not promise a client a particular day's NAV; the payment has to reach the scheme first.
If you learnt this from older material
Decks from 2013-15 describe a system that kept office hours and had no UPI.
What a 2013-15 deck says
- NEFT settles in hourly batches, 8 am to 7 pm, on working days only.
- RTGS is not open round the clock.
- There is no UPI. Cheques are cleared in batches.
What holds in October 2026
- NEFT runs round the clock since 16 Dec 2019, in 48 half-hourly batches.
- RTGS runs round the clock since 14 Dec 2020.
- UPI, begun in 2016, carries most payments. Cheques clear continuously.
Source: RBI circulars of 8 May 2017 and 6 Dec 2019 (NEFT); RBI RTGS FAQ; PIB note on UPI, 24 Aug 2026; RBI circular of 13 Aug 2025 (cheques).
Trainer notes
UPI was launched as a pilot in April 2016 with 21 banks and opened to the public in August 2016. 'Most payments' means by number: about 87% in August 2026. By value, RTGS is far larger. Continuous cheque clearing began on 4 October 2025.
Four things people get wrong
Misconception'NEFT is only for small sums.'
What is trueRBI sets no limit on the amount sent by NEFT. A bank may set its own. RTGS is the one with a ₹2 lakh minimum.
Misconception'Round the clock means instant.'
What is trueNEFT works in half-hourly batches. The payee's account should be credited within two hours of the batch settling.
Misconception'A wrong transfer is easy to undo.'
What is trueAn RTGS payment is final and irrevocable. Banks must now offer a payee-name check before an NEFT or RTGS transfer.
Misconception'A cheque still takes days.'
What is trueSince 4 October 2025 the paying bank answers by 7:00 pm, and the money follows within an hour of settlement.
Trainer notes
The name look-up facility for NEFT and RTGS had to be offered by banks no later than 1 April 2025, at no charge to the customer. On the fourth point, this applies to cheques presented in the day's session, and the usual safeguards of the bank still apply.
Check yourself
Question 1: In one batch, Bank P's customers send ₹30 crore to Bank Q's and Bank Q's send ₹21 crore back. Under net settlement, how much moves between the banks, and which way?
Answer: ₹30 crore − ₹21 crore = ₹9 crore, from Bank P to Bank Q. Under gross settlement, ₹30 crore + ₹21 crore = ₹51 crore would move in all.Question 2: A client wants to send ₹1.5 lakh to another bank at 11 pm on a Sunday. Of NEFT and RTGS, which can carry it, and why?
Answer: NEFT. Both run round the clock, but RTGS has a minimum of ₹2 lakh. RBI sets no limit on NEFT, though the client's bank may have its own.Question 3: An investor pays for a purchase in an equity fund at 2:55 pm. Why might the units be priced at the next business day's NAV?
Answer: The day's NAV applies only if the money is credited to the scheme's account and available for use before the 3:00 pm cut-off. If the payment reaches the scheme after that, the next business day's NAV applies.
Sources and disclaimer
Sources for the figures in this explainer
- NEFT: RBI FAQ on NEFT (updated 2 September 2024); RBI circulars of 8 May 2017 (net settlement) and 6 December 2019 (round the clock from 16 December 2019, 48 batches).
- RTGS: RBI FAQ on RTGS (updated 31 October 2022). Name look-up for NEFT and RTGS: RBI circular of 30 December 2024.
- UPI: NPCI, UPI FAQs (opened 12 October 2026); Press Information Bureau, 'UPI: Transforming India's Payment Landscape', 24 August 2026.
- Cheques: RBI circulars of 13 August 2025 and 24 December 2025 on continuous clearing and settlement on realisation in CTS.
- Payment numbers and values for August 2026: RBI, Payment System Indicators, August 2026. Shares and averages are computed from that table.
- NAV cut-off: SEBI Master Circular for Mutual Funds, 20 March 2026, paras 9.4.2 and 9.4.3. Banks A, B, P and Q and their figures are invented.
This material is for training and investor education only. It is not investment, tax or legal advice and is not a recommendation to buy, sell or hold any security or scheme. Examples use assumed figures unless a source and date are shown. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Trustner Asset Services Pvt. Ltd. is an AMFI-registered Mutual Fund Distributor (ARN-286886).