Real Time Gross Settlement (RTGS) :

One of the important IT revolutions in Indian Banking Scenario was the implementation of the Real Time Gross Settlement (RTGS) system by the Reserve Bank of India. With the changing scenario from manual environment to electronic mode, banks started to use faster, safer and efficient methods to transfer funds.

In this regard, two important and popular electronic funds transfer systems are Real Time Gross System (RTGS) and National Electronic Funds Transfer System (NEFT)

RTGS is an electronic payment system, where payment instructions are processed on a ‘continuous’ or ‘REAL TIME’ basis and settled on a ‘GROSS’ or ‘individual’ basis without netting the debits against credits. In India, RBI introduced this system and the system is functioning well. The payments so effected are ‘final’ and ‘irrevocable’. The settlement is done in the books of the central bank (RBI). The RTGS system allows transfer of funds across banks on a real time (immediate) basis. Each participant bank needs to open a dedicated settlement account for putting through its RTGS transactions. Not only does it allow transfer of funds, it also reduces the credit risk. Both customers and banks can transfer funds monies the same day at regular intervals within the banking hours.

RTGS: Special features:

(a) Real Time Gross Settlement helps banks to settle interbank and forex settlements

(b) It also helps banks in handling big ticket funds transfers

(c) Since RTGS it is routed through RBI platform, the credit risk is minimized (this is one of the main advantages in settlement of funds)

(d) Unlike in case of cheque clearance, the drawer of the cheque cannot enjoy the float time (the date of issuance of cheque and the date on which it is received in inward clearing and debited by his banker) However, in the case of RTGS, the remitter’s account is debited first and then only the funds are transferred

(e) If all relevant details such as the beneficiary’s name, account number, IFSC code of the receiving branch, name of the beneficiary bank, etc., are correctly furnished it would assist the remitting  bank to effect the transfer quickly

(f) As the name RTGS suggests, the transfer mechanism works on real time and, therefore, the beneficiary
branch/bank should receive the funds immediately. The beneficiary’s branch/bank should give credit to the
beneficiary’s account immediately or latest within 2 hours of receiving the funds transfer message.

However, in case the funds cannot be credited for any reason, such funds should be returned to the originating branch within two hours. In such a situation, as soon as the money is returned, the  remitting bank should reverse the original debit entry in the client’s (remitter’s) account. This system is applicable between banks/branches who are on Core Banking Solutions (CBS)