Real Time Gross Settlement (RTGS) is a prominent electronic funds transfer system used for high-value and time-critical transactions in India. It enables real-time and immediate settlement of interbank fund transfers, allowing funds to be credited in the beneficiary’s account on a gross basis. Here are detailed notes on RTGS:
1. Operation and Management:
- RTGS is operated and managed by the Reserve Bank of India (RBI), the central banking institution of India.
- It operates on a transaction-by-transaction basis, where each transaction is settled individually and immediately.
2. Transaction Process:
- Initiator: The person or entity initiating the fund transfer is known as the “Remitter.”
- Beneficiary: The person or entity receiving the funds is called the “Beneficiary.”
3. RTGS Timings: RTGS operates during the working hours of RBI on all working days, except for second and fourth Saturdays of the month, and bank holidays.
4. Minimum Transaction Amount: As per RBI guidelines, the minimum amount that can be transferred through RTGS is Rs.2 lacs.
5. RTGS Charges: RTGS charges vary depending on the transaction amount. The RBI has instructed banks not to levy any charges on RTGS transactions initiated by customers.
6. Process of RTGS Transaction:
- The Remitter fills out an RTGS application form, providing the Beneficiary’s bank account details, including the bank’s Indian Financial System Code (IFSC), account number, and the amount to be transferred.
- The Remitter submits the filled application form to their bank along with the necessary funds.
- The Remitter’s bank verifies the details and initiates the RTGS transaction through RBI’s RTGS system.
- RBI’s RTGS system processes the transaction in real-time and forwards the funds to the Beneficiary’s bank.
- The Beneficiary bank credits the amount to the Beneficiary’s account immediately and on a gross basis, i.e., without netting off against other transactions.
7. Advantages of RTGS:
- Real-Time Settlement: RTGS ensures immediate and real-time settlement of high-value transactions, making it ideal for time-sensitive payments.
- High-Security Standards: RTGS adheres to strict security protocols, providing a safe and secure way to transfer large amounts of money.
- No Upper Limit: RTGS allows high-value transactions without any upper limit.
8. Limitations of RTGS:
- Limited Operating Hours: RTGS operates only during the working hours of RBI, which means transactions cannot be initiated outside these hours.
9. RTGS Refunds: In case of failed or rejected RTGS transactions, the Remitter’s bank is responsible for refunding the amount to the Remitter’s account.
RTGS is a critical electronic funds transfer system that facilitates large-value transactions with immediate settlement in India. It is widely used for various purposes, including interbank transfers, high-value corporate transactions, government-related payments, and other time-critical fund transfers. With its real-time settlement capabilities and high-security standards, RTGS plays a crucial role in the efficient functioning of the country’s financial system.