RTGS (Real-Time Gross Settlement) is a fund transfer mechanism provided by banks. It entails the settlement of fund transfers in a seamless and real-time manner. Because you look at the term "real-time," it refers to a settlement that takes place as soon as the proceeds are issued. So, to put it more simply, the transaction settles in the receiving bank as soon as it is transferred from the issuing bank. Gross settlement ensures that each transaction is done and settled individually, rather than being bundled or clustered around each other. Real-time gross settlement payments are irreversible and final once made. For large-value interbank funds transfers, real-time gross settlement is widely used. Central banks around the world are gradually using RTGS frameworks, which can help reduce the risks involved with high-value payment settlements between banking firms or financial entities. In this we will discuss the benefits, charges and timings of RTGS fund transfer system.
Benefits of RTGS
- The money sent by the remitter will reach the payee/beneficiary as soon as the transaction is initiated, thanks to this electronic fund transfer process.
- It is necessary to have certain details of the beneficiary, such as the account number, bank name, IFSC code, and account holder name, in order to facilitate RTGS transaction. Another fascinating aspect of this money transfer method is the convenience to arrange transactions or transfers in advance.
- The Reserve Bank of India (RBI) runs the RTGS payment system, making it a convenient and secure way to send and receive money in India at any time and from anywhere.
- RTGS is one of the fastest methods of transferring funds to someone. It is even faster and convenient than NEFT.
- The Central Bank of India uses real-time gross settlement to help reduce the risk associated with all high-value transactions. Vulnerabilities will always exist, notwithstanding the fact that financial institutions and banks have extremely high security mechanisms in place to secure their customers' records. Which is why the real-time gross settlement system has provided customers with a high degree of confidentiality by processing all of their settlements electronically.
- You can make remittances without using a physical cheque or a demand draft if you use online banking. The beneficiary, on the other hand, does not require to go to a bank branch to deposit the required physical papers.
The Reserve Bank of India (RBI) had announced in its declaration on Development and Regulatory Policies that RTGS will be available 24 hours a day, seven days a week beginning from December 2020. Previously, transfers can only be done between 7:00 a.m. and 6:00 p.m. on all working days, except the second and fourth Saturdays of the month and Sundays. After the RBI made the NEFT facility open 24 hours a day, seven days a week starting from 2019, this decision was announced. Apart from 24x7 accessibility, the RTGS has a range of advantages over other forms of funds transfer. It's a more reliable, safer mechanism with no limit to how much money you can transfer.
Difference between RTGS and NEFT
National Electronic Funds Transfer (NEFT) is an electronic fund transfer system that uses Deferred Net Settlement (DNS) for settlements. This simply means that NEFT transactions are not settled until a certain number of transactions are issued by a certain cut-off deadline. The transactions issued at a given time are processed in batches in NEFT. If you make a fund transfer after a settlement period in NEFT, for example, the transaction will not be accepted until the next settlement time. Individuals can electronically transfer funds from any bank branch to an individual who has an account with any other bank branch using NEFT. The NEFT system does not allow for real-time fund transfers. RTGS transfers, on the other side, are processed as they are issued, and transactions can be made 24 hours a day, seven days a week.
Difference between RTGS and IMPS
The National Payment Corporation of India handles the Immediate Mobile Payment Services (IMPS), which is a real-time instant inter-bank funds transfer system. Unlike NEFT, IMPS is available 24 hours a day, seven days a week, including holidays. This method allows you to transfer money 24 hours a day, seven days a week. Online banking or mobile banking can be used to complete IMPS. RTGS, on the other hand, is a highly reliable and safe mode of fund transfer system. RTGS is another real-time, gross-based payment method. RTGS is generally used for high-value transactions that need to be completed immediately.
The Reserve Bank of India (RBI) has revoked the RTGS transaction processing fees. Here are the broad framework imposed by banks for RTGS service:
For inward transactions: No fees is levied
For outward transactions: Rs 2,00,000/- to 5,00,000/- : not exceeding Rs 24.50/-; (exclusive of tax, if any). Above Rs 5,00,000/- : not exceeding Rs 49.50/-. (exclusive of tax, if any). (Source: RBI).