Real-time gross settlement (RTGS)
Real-time gross settlement (RTGS) is a payment system that allows for the transfer of funds between banks in real time, typically within a few seconds. This means that payments are processed immediately, rather than waiting for the next settlement cycle, which can take place daily or several times a week.
Here are the key features of RTGS:
- Real-time: Payments are processed and settled in real time, typically within seconds.
- Gross settlement: Each payment is processed separately, rather than being grouped with other payments in a settlement batch.
- Interbank: RTGS allows for payments between banks, not just within a single bank.
- Fast and efficient: RTGS is a fast and efficient way to transfer funds, with minimal delays.
Here are some of the benefits of RTGS:
- Reduced settlement risk: RTGS reduces the risk of settlement failure, as payments are processed in real time.
- Improved cash flow: RTGS can improve cash flow for businesses, as they can receive payments faster.
- Reduced operational costs: RTGS can reduce operational costs for banks, as it eliminates the need for reconciliation and settlement batch processing.
- Increased transparency: RTGS can increase transparency in the payment system, as all payments are recorded in real time.
Here are some of the challenges associated with RTGS:
- System risk: RTGS systems are complex and can be vulnerable to technical problems.
- Failed payments: Despite the low risk of settlement failure, there can still be failed payments.
- Costs: RTGS can be more expensive than traditional payment systems, especially for small payments.
Overall, RTGS is a major innovation in the payment system that has the potential to significantly improve the way we transfer funds.
FAQs
What is a Real Time Gross Settlement (RTGS) transfer?
RTGS is a system for transferring funds between banks in real time (immediate processing) and on a gross basis (individual transactions settled separately).
What is the settlement time for RTGS payments?
RTGS transactions are settled immediately during banking hours, typically within a few minutes. If there is a delay, the beneficiary bank must credit the account within 30 minutes of receiving funds.
Which is faster, NEFT or RTGS?
RTGS is faster as it processes transactions in real time, whereas NEFT operates in batches and may take longer for funds to be credited.
What does “gross” mean in RTGS?
“Gross” means each transaction is settled individually without bundling with other transactions, ensuring immediate processing.
What is the cut-off time for RTGS transfers?
RTGS is usually available during banking hours, with specific cut-off times varying by bank. Many banks provide RTGS services 24×7 for online transfers.
