Real-Time Gross Settlement (RTGS)

Definition: RTGS, is a short form for Real-Time Gross Settlement. It is a facility provided by the banks, that allows instant and complete settlement of funds from one bank to another and from one place to another, on an individual order basis. This means that the transactions are settled at the same time when they take place and so there is no waiting period.

Payments made through RTGS are final in nature which cannot be revoked. Moreover, the prescheduling of a transaction is allowed.

RTGS is mainly used for the high-value interbank transfer of money, in order to mitigate the risk of settlement and fraud.

Details Required for RTGS

The person (sender) who initiates the transfer must have the following details:

• Indian Financial System Code (IFSC) of the beneficiary’s bank.
• Name of beneficiary
• Account number of the beneficiary
• Amount to be remitted
• Name of the beneficiary’s bank and branch
• Account number of the sender/originator

Along with this, the bank branches of both the parties need to be RTGS-enabled, only then the transaction will be processed.

Minimum and Maximum Limit

This system is primarily developed to facilitate the transfer of large value funds between parties. Hence the least amount which is transferred through this system is Rs. 2 lakhs, while no maximum ceiling is there in RTGS.

Banks provide this service for a specified fee, wherein inward transactions are free, but a certain amount is charged on the outward transaction, depending upon the amount remitted.

How to do RTGS?

To transfer funds using RTGS, the first thing you require is the activation of internet banking facility. For this purpose, you need to visit your bank branch and complete the formalities for its activation. Nowadays, one can activate this facility online also using the concerned bank’s website.

1. Log in to the web portal, using the UserID and password.
2. Once you enter the user ID and password, you will land at your account and profile where you have to select the profile.
3. Thereafter click on Add and manage beneficiary.
4. Then, you need to enter your profile password and click the submit button.
5. You will see various options for adding a beneficiary, choose the relevant option as per your need.
6. Upon clicking the appropriate option, you will be asked to fill the details of the beneficiary.
7. Check the details and click on approve now button.
8. Next click on the approve beneficiary radio button, where you will have two options – Approve through ATM, or Approve through OTP
9. If you choose to approve through OTP, you will receive a high-security password at your registered mobile number, linked to the account. Now simply enter the password and click on approve button.
10. Once the beneficiary is added the following steps are required to follow:
    • Go to the payment/transfer tab and click inter-bank transfer.
    • Select the Transaction Type, i.e RTGS and go to fund transfer section
    • A list of beneficiaries will be displayed, select the beneficiary/payee
    • Enter the amount to be transferred
    • Select the checkbox stating that you agree with the terms of service and accept.
    • Review the details and confirm.

In this way, the amount will be transferred successfully to the beneficiary’s account.

Advantages of RTGS

1. RTGS is one of the safest as well as the fastest mode of interbank transfer
2. This facility is available on all business days, whose timings may vary from bank to bank.
3. It is an immediate fund transfer mechanism.
4. It is a paperless transfer of funds.
5. The beneficiary is not required to visit the bank, to deposit the money.
6. The funds can be transferred using the internet banking service.

Limitations of RTGS

• RTGS does not provide the facility to track the transaction to its customers, as only the positive confirmation feature is implemented by the central bank in which the remitting bank gets a message of fund transfer to the beneficiary bank, from the central bank.

In general, the beneficiary branches may receive funds in real-time, i.e. as and when the funds are sent by the remitting bank. The beneficiary bank has to credit the fund in the account of the beneficiary, within half an hour of the funds’ transfer message.

However, if the funds are not transferred to the beneficiary’s account due to the reasons like account frozen, or non-existence of account, then the funds are returned to the originating bank. Moreover, if there is a delay in refunding the failed amount, the initiating party is entitled to receive compensation at the current repo rate + 2%