Real Time Gross Settlement (RTGS) is a payment system that facilitates the transfer of funds from one bank to another in real-time. This system is used for large-value transactions that require immediate clearing and settlement. In this article, we will discuss the full form and meaning of RTGS, how it works, its benefits, and other relevant information.
What is RTGS?
RTGS stands for Real Time Gross Settlement, a payment system used to transfer funds from one bank to another. It is a fast, secure, and reliable method used for large-value transactions that require immediate clearing and settlement. In an RTGS transaction, the money is transferred from one bank to another in real-time without any delay.
How Does RTGS Work?
RTGS works on a real-time basis, which means that the payment instructions are processed as soon as they are received. The payment instruction is sent by the remitting bank to the beneficiary bank through the RBI’s RTGS system. The RBI acts as the intermediary for settling the payment. Once the payment is settled, the beneficiary bank credits the money to the beneficiary’s account.
Benefits of RTGS
RTGS offers several benefits, including:
- Real-time settlement: RTGS enables real-time transfer of funds, which means that the transaction is processed as soon as it is initiated.
- Secure: RTGS is a secure method of transferring funds as it uses robust encryption techniques to ensure that the transaction is safe from fraud or hacking.
- High limits: There is no upper limit on the amount that can be transferred through RTGS, which makes it an ideal payment method for large-value transactions.
- Fast processing: RTGS transactions are processed quickly, which ensures that the payment is credited to the beneficiary’s account within a few minutes.
- Transparency: The transaction details are available to both the remitting and beneficiary banks, which ensures transparency in the payment process.
Charges for RTGS Transactions
The charges for RTGS transactions vary from bank to bank. Generally, banks charge a fee for processing RTGS transactions. The fee charged by banks for RTGS transactions is usually higher than the fee charged for NEFT transactions.
Limitations of RTGS
Despite its many benefits, RTGS has some limitations, including:
- Limited availability: RTGS is available only during working hours on weekdays. Transactions initiated outside working hours are processed on the next working day.
- High fees: RTGS transactions are generally more expensive than NEFT transactions.
- Large transactions only: RTGS is meant for large-value transactions only. Transactions below a certain threshold cannot be processed through RTGS.
How to Use RTGS
To use RTGS, you need to follow these steps:
- Visit your bank and provide the necessary details such as beneficiary’s name, account number, and the amount to be transferred.
- Fill out the RTGS form provided by the bank.
- The bank will then initiate the payment through the RTGS system.
- Once the payment is processed, the beneficiary bank will credit the money to the beneficiary’s account.
RTGS vs NEFT
NEFT (National Electronic Funds Transfer) is another payment system used to transfer funds from one bank to another. However, there are some key differences between RTGS and NEFT:
- Real-time settlement: RTGS offers real-time settlement, while NEFT transactions are processed in batches at pre-determined intervals throughout the day.
- Transfer limits: While there is no upper limit on the amount that can be transferred through RTGS, NEFT transactions have a lower limit of Rs. 1 and an upper limit of Rs. 10 lakh.
- Availability: RTGS is available only during working hours on weekdays, while NEFT is available 24×7, including weekends and holidays.
RTGS vs IMPS
IMPS (Immediate Payment Service) is another real-time payment system used in India. Here are some differences between RTGS and IMPS:
- Transfer limits: RTGS is meant for large-value transactions, while IMPS is designed for smaller transactions.
- Availability: RTGS is available only during working hours on weekdays, while IMPS is available 24×7, including weekends and holidays.
- Fees: The fees for RTGS transactions are generally higher than the fees for IMPS transactions.
RBI Guidelines for RTGS
The Reserve Bank of India (RBI) has set certain guidelines for RTGS transactions. Some of the key guidelines are:
- RTGS is meant for large-value transactions only.
- There is no upper limit on the amount that can be transferred through RTGS.
- The remitting bank is responsible for ensuring that the beneficiary’s account is KYC-compliant.
- The remitting bank must ensure that the payment instruction is accurate and complete.
- The beneficiary bank must credit the money to the beneficiary’s account immediately upon receipt of the payment instruction.
History of RTGS
RTGS was first introduced in the United States in 1970. In India, RTGS was launched in March 2004, initially with four banks. Today, RTGS is used by more than 140 banks in India.
RTGS in India
In India, RTGS is used for large-value transactions such as the payment of salaries, payments to suppliers, and investment in securities. As of March 2021, the daily average value of RTGS transactions in India was over Rs. 6 lakh crore.
RTGS Around the World
RTGS is used in several countries around the world, including the United States, Canada, Europe, and Asia. Each country has its own RTGS system with its own rules and regulations.
Future of RTGS
With the growth of digital payments, the use of RTGS is likely to increase in the future. However, with the emergence of newer payment systems such as UPI and BharatQR, the dominance of RTGS may be challenged in the long run.
FAQs on RTGS
RTGS stands for Real Time Gross Settlement.
RTGS offers real-time settlement, while NEFT transactions are processed in batches. RTGS is meant for large-value transactions, while NEFT is designed for smaller transactions. RTGS is available only during working hours on weekdays, while NEFT is available 24×7.
There is no upper limit on the amount that can be transferred through RTGS.
Yes, RTGS is a secure method of transferring funds as it uses advanced security measures such as two-factor authentication and encryption.
No, RTGS is used only for domestic transactions within India.
RTGS transactions are processed in real-time, which means that the funds are transferred immediately. However, the beneficiary bank may take some time to credit the funds to the beneficiary’s account.
The fee for an RTGS transaction varies depending on the amount being transferred and the bank’s policies. Generally, the fees for RTGS transactions are higher than the fees for NEFT transactions.
You can initiate an RTGS transaction by visiting your bank’s branch or through the bank’s online banking portal. You will need to provide the beneficiary’s account details and the amount to be transferred. The bank will then initiate the transaction on your behalf.
Once an RTGS transaction has been initiated, it cannot be cancelled. However, if you have made an error in the payment instruction, you can contact your bank and request a reversal of the transaction.
If an RTGS transaction fails due to technical reasons, the funds will be returned to the remitting bank within 2 hours. If the transaction fails due to incorrect details provided by the remitter, the funds will be returned to the remitting bank within 1 day after receiving the request for reversal.
Conclusion
RTGS is a real-time payment system used for large-value transactions. It offers several benefits such as real-time settlement, high limits, and transparency. However, it also has some limitations such as limited availability and high fees.
Despite its limitations, RTGS is widely used in India and around the world for large-value transactions. Hope this information on RTGS full form and its meaning is helpful.