Today I am going to take you through different and most commonly used payment and settlement systems in India. Majority of Indian population prefer to use these systems for settling deals.
For our day-to-day purchases, we prefer to pay by cash because it’s secure and convenient. But, what if we need to send money to a loved one instantly who is living far from us or need to buy something but have not enough cash?
Similarly, what if you’re at a place where your currency notes are not accepted or you spent all of your money extravagantly on a trip.
A quite different scenario can also arise where your nation may announce demonetization of current currency notes, which just happened in India (Indian government had announced the abolition of Rs. 1000 and 500 notes to deal with counterfeit notes menace), but you need money to fulfill your daily requirements?
If you stuck in any of the above scenarios or in other, then don’t panic! There are a number of alternative non-cash payment and settlement methods available to get some buying done without paying in cash.
In this article, I’ve come up with different payment methods to complete your purchases an deals. Read on to know different payment and settlement systems in India to pay for your purchases without paying in cash.
Different payment and settlement systems in India
1. Pay by cheque or draft
Paper-based payment methods such as cheque and demand draft are the second (assuming cash first) easiest and preferable payment method used by most people in India.
In cheque payment, you give a signed leaf of cheque from your cheque book to someone like seller, lender or the like, and he/she receives the cash from his/her bank after depositing it. Therefore, if you carry your cheque book then you can pay the amount through a cheque; if seller or beneficiary accepts.
Similarly, demand draft can also be opt to settle the deals.
2. Electronic Fund Transfer (EFT)
Electronic fund transfer is a trending payment method and almost all banks offer this facility to their customers. Usually, in EFT, we use digital banking payment channels like internet banking, mobile banking, or SMS banking, to transfer funds from one account to another.
It is a reliable and secure payment method and a large percentage of people and organizations use it. Electronic fund transfer has three basic types: NEFT, RTGS, and IMPS, depending upon the amount of transfer and medium of transfer.
In addition to these traditional EFT payment methods, a new one is also introduced by government of India which is called Unified Payment Interface (UPI). It’s a part of digital India initiative.
Transfer Funds Using NEFT, RGTS, or IMPS
(a) Immediate Payment Service (IMPS):
IMPS executes transfer in real-time. It is a quick money transfer mode to send and receive money from one account to another. In IMPS, remitter transfers funds from his bank account to the beneficiary’s using mobile device, internet banking, or ATM machine and payee receives the same within few minutes to 24 hours.
Immediate payment service can be availed anytime and anywhere. IMPS allows you transfer up to Rs. 50,000 excluding initial period of activation. And thereafter, you can set the maximum limits.
Features of IMPS:
- Anyone can use IMPS facility; if his/her bank provides.
- This service is available 24*7 including holidays and weekends.
- No charges to be levied from beneficiaries.
- You can transfer up to Rs. 50,000 per day.
- It is a real-time electronic payment method; which means receiver gets money within a few minutes or instantly.
Requirements to send money through IMPS
You would need to activate mobile banking, phone banking or internet banking service of your concerned bank on your account. Alternatively, you can install a UPI app to quickly transfer the money.
To activate mentioned services you can visit your bank branch, online banking, or visit nearest ATM and perform following steps:
- Swipe your ATM-cum-debit card
- Select mobile registration, you will be asked to enter your ATM PIN, just enter it to proceed.
- Select SMS/Secure/IMPS and then enter your mobile number.
- Subsequently press/tap on confirm.
- You will receive 7 digits MMID number on your registered mobile number.
Note: Above ATM procedure is for SBI therefore steps may vary but would remain same.
Beneficiary details needed:
- Mobile Number
- Mobile Money Identifier (MMID): Number issued (usually 7 digits) by the bank upon registration of mobile banking or the like you received upon mobile banking registration.
How to transfer funds using IMPS
You can send/receive money through IMPS by using ATM, Mobile, or Internet Banking. For more information, contact your bank.
(b) National Electronic Fund Transfer System
NEFT is another reliable, secure, and efficient way of electronic money transfer, which allows fund transfer in near real time (if transferred within working time slots). There are no minimum and maximum caps even you can send 1 rupee.
Unlike IMPS, NEFT works on time slots which means you may transfer amount anytime but beneficiary will receive the amount according to the time slots.
It is noticeable that this National Electronic Fund Transfer system may or may not work on Sundays and national holidays.
There are currently 12 time slots from 8am to 7pm on week days. If you send money before 5pm then receiver may expect the credit on the same day or instantly. On the other hand, transfer after the bank working hours may take some time or a day.
Feature of NEFT:
- There are no inward transaction charges.
- You can send any amount you would like to.
- Payee details such as name, account number, and bank IFSC code required.
- Amount will be credited to the beneficiary bank account according to the available time slots.
How to do NEFT?
You can login to internet banking or mobile banking service of your bank to do NEFT. You may also visit your bank branch to send money using NEFT.
Here are steps some posts on NEFT pertaining to different banks:
(c) Real Time Gross Settlement System (RTGS)
A real time electronic money transfer system that allows you transfer fund from your account to beneficiaries within the bank business hours. Like NEFT, it also does not work on Sundays and national holidays.
There are no upper cap limits of transfer but lower limits exist. Minimum amount that can be transferred using RTGS is ₹2 Lakh.
Features of RTGS:
- RTGS minimum transfer limit is Rs.2 Lakh.
- There are no upper cap limits.
- This facility is available on all business working days except Sundays and holidays. (may vary)
How to do RTGS?
It’s similar to NEFT, just at the time of initiating fund transfer, choose RGTS. You can use internet banking service of your bank to transfer funds through RTGS.
For further queries, contact your bank representatives.
3. Plastic Money Options
Credit cards, debit cards, EMI cards, pre-paid cards and the like are most prominent plastic money options.
Many sellers accept payments through these sources. Therefore, you can locate point-of-sale (POS) terminals to pay for your shopping bills, hotel bills, restaurant bills and to settle business deals you can use these payment mediums. Usually, at POS terminals you swipe your card to pay for goods or services.
Tip: Do ask if there is any additional fee before swiping your card at POS.
It is an emerging payment and settlement system in India and lucrative cash back offers make it more lucrative. Basically electronic wallets allow you add money to them from your bank accounts using your credit card or debit card and the like, and then you can use that amount to pay for your online shopping, bills, fuel charges, taxi charges, and tickets etc.
It is highly recommended payment gateway because many e-Wallet apps pay you interest as your bank pays on your bank account. You get interest if you have not used the amount that you have added into your electronic wallet.
As of now digital wallet system is evolving very rapidly. Many financial institutions and e-Commerce websites like SBI Bank Buddy mobile wallet, Paytm wallet, PayPal, Google Pay, and the like, offer digital wallet facilities.
In my recent post, I showed best safe and secure e wallets in India which offer decent cashback on making payments.
5. Wire Transfer
Another important digital fund transfer gateway, which allows you, transfer fund overseas. This is an old, trustworthy and frequently used method to transfer funds from country to country.
You can use this payment gateway if you need to send money to abroad. This type of money transfer subjects to different taxes and charges. Wire transfer usually takes 5-7 days to complete.
6. Unified Payment Interface (UPI)
Government of India is actively working to make India a digital economy and as result it has introduced a new payment gateway which called Unified Payment Interface (UPI). UPI has been overwhelmingly adopted by Indians. In fact, it has become Indians most preferable digital payment and settlement method in no time.
Almost every Indian has reach to this UPI platform. UPI payment channel lets you send or receive money easily in real-time with no to very few charges.
Service can be accessed through official BHIM UPI app or by dialing *99#. App is available for all banks and number too. *99# is universal number for all banks.
Visit official Reserve Bank of India website for more information on payment and settlement systems in India.