Payment Systems in India: RTGS, NEFT, UPI & SWIFT

By Vikram Mehta | Updated March 2026

What Are Payment Systems in India?

Payment systems in India are the mechanisms through which money moves between bank accounts — domestically and internationally. They are governed by the Payment and Settlement Systems Act, 2007 (PSS Act), which empowers the Reserve Bank of India (RBI) to regulate, authorize, and supervise every payment system operating in the country. The four systems foreign companies interact with most frequently are RTGS (Real Time Gross Settlement), NEFT (National Electronic Funds Transfer), UPI (Unified Payments Interface), and SWIFT (Society for Worldwide Interbank Financial Telecommunication) for cross-border transfers.

For a foreign company setting up operations in India — whether through a wholly owned subsidiary, branch office, or liaison office — understanding these systems is essential. You will use RTGS or NEFT for vendor payments, salary disbursements, and tax remittances. UPI increasingly handles small merchant payments and employee reimbursements. SWIFT is how your parent company sends capital to India and how you repatriate dividends or profits back home.

The National Payments Corporation of India (NPCI), incorporated in December 2008 under Section 25 of the Companies Act by RBI and the Indian Banks' Association (IBA), operates retail payment systems including UPI, IMPS, and RuPay. RTGS and NEFT, being large-value and systemically important, are operated directly by the RBI.

Legal Basis

• Payment and Settlement Systems Act, 2007 (PSS Act) — The primary legislation, enacted in December 2007. It establishes the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) within the RBI and requires every payment system operator to obtain RBI authorization.
• Section 4 of the PSS Act — No person can operate a payment system in India without RBI authorization. Penalties for unauthorized operation: up to INR 10 crore or imprisonment up to 3 years (Section 26).
• RBI Circular DPSS.CO.RTGS No. 2723 (December 2020) — Extended RTGS to 24×7×365 availability, effective December 14, 2020.
• RBI Circular DPSS.CO.PD No. 1262 (December 2019) — Made NEFT available on a 24×7×365 basis.
• FEMA, 1999 and RBI Master Direction on Reporting — Govern all cross-border payments through SWIFT, including FEMA compliance requirements for inward and outward remittances.
• NPCI Circular OC-166 (2025) — Enhanced UPI transaction limits for specified merchant categories to INR 5 lakh per transaction, effective September 15, 2025.

RTGS: Real Time Gross Settlement

RTGS is India's large-value, real-time payment system. Each transaction is settled individually and instantly — there is no batching or netting. This makes it the preferred channel for high-value corporate payments, capital infusions from foreign parent companies (post-FC-GPR filing), and intercompany fund transfers.

Key Features

• Minimum amount: INR 2 lakh per transaction
• Maximum amount: No upper limit set by RBI (individual banks may impose limits)
• Availability: 24×7×365 since December 14, 2020
• Settlement: Real-time, transaction-by-transaction (gross settlement)
• Charges: RBI has waived processing charges for online RTGS transactions since July 1, 2019. Banks may charge for branch-initiated transactions (typically INR 25–50)
• Operator: Reserve Bank of India

For foreign subsidiaries in India, RTGS is the standard channel for receiving FDI capital from the parent company's authorized dealer bank after SWIFT-to-domestic conversion.

NEFT: National Electronic Funds Transfer

NEFT is India's workhorse electronic transfer system for medium- and small-value payments. Unlike RTGS, transactions are processed in batches — every 30 minutes, 48 batches per day — though the system now operates round the clock since December 2019.

Key Features

• Minimum amount: INR 1 (no minimum threshold)
• Maximum amount: No upper limit (individual banks may cap at INR 10–50 lakh per transaction)
• Availability: 24×7×365 since December 16, 2019
• Settlement: Batch processing every 30 minutes (deferred net settlement)
• Charges: RBI mandated zero charges for online NEFT transactions for savings account holders from January 1, 2020. Current accounts may attract nominal fees at some banks
• Operator: Reserve Bank of India

NEFT is ideal for routine vendor payments, GST deposits, and recurring transfers below INR 2 lakh where real-time settlement is not critical.

UPI: Unified Payments Interface

UPI is India's instant mobile payment system, developed by NPCI and launched in April 2016. It allows real-time interbank transfers using a Virtual Payment Address (VPA) or QR code — no bank account details needed at the point of transaction. UPI processed over 16.6 billion transactions in a single month (October 2024), making it the world's largest real-time payment system by volume.

Transaction Limits by Category (Effective September 15, 2025)

Charges

UPI transactions are zero-cost for standard bank-to-bank transfers. A 0.5%–1.1% interchange fee applies only on Prepaid Payment Instrument (PPI) wallet-based transactions above INR 2,000 to merchants. From April 2026, all UPI transactions require two-factor authentication with at least one dynamic security factor.

SWIFT: International Payments

SWIFT is not a payment system itself but a secure messaging network connecting over 11,000 financial institutions across 200+ countries. When a foreign parent company sends capital to its Indian subsidiary, or when the subsidiary repatriates dividends, the transaction flows through SWIFT using standardized message types — most commonly MT103 for single customer credit transfers.

How an Inward SWIFT Transfer Works

1. Sender's bank abroad initiates an MT103 message specifying beneficiary details, amount, currency, and charges option (OUR/BEN/SHA)
2. The message routes through one or more correspondent banks (intermediaries)
3. The beneficiary's authorized dealer bank in India receives the message, converts foreign currency to INR at the applicable exchange rate, and credits the Indian account
4. For FDI-related inflows, the AD bank issues a Foreign Inward Remittance Certificate (FIRC) — critical for FEMA reporting

SWIFT Transfer Costs and Timeline

The charges option in field 71A of the MT103 determines who bears the fees: OUR (sender pays all), BEN (beneficiary pays all), or SHA (shared — most common for commercial transfers). Foreign companies sending FDI capital to India should use OUR to ensure the full investment amount reaches the Indian subsidiary without deductions.

IMPS: Immediate Payment Service

IMPS, operated by NPCI since November 2010, fills the gap between NEFT (batch-based) and RTGS (high minimum). It offers instant, 24×7 transfers with no minimum amount and a maximum of INR 5 lakh per transaction (increased from INR 2 lakh in 2021). Unlike UPI, IMPS works through internet banking and does not require a smartphone app. From February 15, 2026, banks have begun levying nominal charges on online IMPS transactions above INR 25,000 — approximately INR 2–10 plus GST depending on the transfer slab.

Comparison: Which Payment System to Use When

How This Affects Foreign Companies Operating in India

Foreign companies encounter India's payment systems at every stage of their operations:

Receiving FDI Capital

When the parent company transfers equity capital, the flow is: SWIFT (international) → AD bank in India → RTGS (to subsidiary's current account). The AD bank issues a FIRC, which is mandatory for filing Form FC-GPR with the RBI within 30 days. Delays in obtaining the FIRC can hold up regulatory filings.

Paying Vendors and Employees

Domestic vendor payments above INR 2 lakh should use RTGS for speed. Salary disbursements typically use NEFT (batched, zero-cost). Many Indian vendors — especially smaller ones — now prefer UPI payments via QR code, which can simplify petty cash management for foreign companies.

Tax Payments

GST, TDS, and advance corporate tax payments to the government are typically routed through NEFT/RTGS to the designated RBI collection account. UPI is now accepted for tax payments up to INR 5 lakh.

Repatriating Dividends and Profits

Outward remittances to the parent company flow through SWIFT. The AD bank will require Form 15CA/15CB (tax compliance certificates), board resolution, and transfer pricing documentation before processing the SWIFT transfer. The MT103 message serves as proof of payment for both the Indian company and the overseas recipient.

Common Mistakes

• Using NEFT for time-sensitive payments above INR 2 lakh. NEFT settles in 30-minute batches, meaning a payment initiated at 10:05 may not reach the beneficiary until 10:30 or later. For urgent large-value payments — especially statutory deadlines — use RTGS, which settles in seconds.
• Not negotiating the forex markup on SWIFT transfers. Banks typically apply a 1.5%–2.5% markup over the mid-market rate on inward remittances. On a USD 500,000 FDI transfer, a 2% markup costs you INR 8.5 lakh. Ask your AD bank for a treasury rate or competitive quote — most banks will negotiate for large transfers.
• Ignoring the SWIFT charges option (OUR/BEN/SHA) on FDI inflows. If the parent company sends USD 100,000 with SHA (shared charges), correspondent bank deductions of USD 30–60 mean the FIRC shows less than the full investment amount. This creates a mismatch with the FC-GPR filing. Always use OUR for equity capital transfers.
• Assuming UPI works for all corporate payments. UPI has per-transaction and daily limits (INR 1–5 lakh depending on category). It is designed for retail and small merchant payments. Corporate treasury operations, vendor payments above INR 5 lakh, and intercompany transfers require RTGS or NEFT.
• Failing to obtain the FIRC promptly after receiving SWIFT funds. The FIRC is not automatic — you must request it from your AD bank. Without a FIRC, you cannot file FC-GPR within the 30-day deadline, triggering late filing penalties and potential FEMA compounding proceedings.

Practical Example

StellarTech Pte Ltd, a Singapore-based SaaS company, incorporates a wholly owned subsidiary in India — StellarTech India Pvt Ltd — with authorized capital of INR 10 crore. Here is how they interact with India's payment systems in their first 6 months:

• Month 1 — FDI Capital Infusion: StellarTech Pte Ltd sends USD 1,200,000 via SWIFT (MT103, charges option: OUR) from DBS Bank Singapore. The funds arrive at HDFC Bank India (AD bank) in 2 business days. HDFC converts at INR 84.20/USD (mid-market was INR 85.00 — a 0.94% markup negotiated in advance). INR 10,10,40,000 is credited. HDFC issues FIRC the same day. StellarTech India files FC-GPR within 30 days.
• Month 2 — Office Setup: StellarTech India pays the landlord's security deposit of INR 15 lakh via RTGS (instant, free). Furniture vendor receives INR 3.2 lakh via RTGS. IT equipment vendor (INR 85,000) is paid via NEFT (settles within 30 minutes, free).
• Month 3 — First Salaries: 12 employees receive salaries totaling INR 18.6 lakh via NEFT batch transfer (free, processed in one settlement cycle). Professional tax of INR 2,500 per employee is deposited to the state government via NEFT.
• Month 4 — GST and TDS: Quarterly GST of INR 4.2 lakh and monthly TDS of INR 1.8 lakh are paid via NEFT to the government's RBI collection account. No charges.
• Month 6 — Dividend Repatriation: Board declares an interim dividend of INR 50 lakh. After TDS of INR 5 lakh (10% under the India-Singapore DTAA) and filing Form 15CA/15CB, the AD bank processes a SWIFT transfer of approximately USD 53,500 to StellarTech Pte Ltd in Singapore. Bank charges: INR 500 (SWIFT fee) + INR 750 (handling) + 18% GST = INR 1,475. The parent receives the funds in 1 business day via SWIFT GPI.

Key Takeaways

• The Payment and Settlement Systems Act, 2007 is the governing law — RBI regulates all payment systems in India, with NPCI operating retail systems (UPI, IMPS) and RBI directly operating RTGS and NEFT
• RTGS (minimum INR 2 lakh, no maximum, real-time, free online) is the standard for large corporate and FDI-related transfers
• NEFT (no minimum, batch settlement every 30 minutes, free online) handles routine vendor and salary payments
• UPI (instant, INR 1–5 lakh limits by category, free for bank-to-bank) dominates retail but has limited use for large corporate payments
• SWIFT (1–3 business days, USD 25–80+ in total fees) is the only channel for international remittances — always use OUR charges option for FDI capital
• Foreign companies must obtain a FIRC from their AD bank after every inward SWIFT remittance — this document is mandatory for FC-GPR filing and FEMA compliance

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