What is RTGS?
Real Time Gross Settlement (RTGS) is a fund transfer system used by banks to move money from one bank to another. In RTGS, transactions are processed individually, in real time, without netting with other payments. In India, RTGS is operated by the Reserve Bank of India (RBI) and is primarily meant for high-value transfers of ₹2 lakh or more.
How Does RTGS Work?
When you initiate an RTGS transaction, your bank sends a payment message to the RBI’s central processing system. The RBI immediately debits the sending bank’s account and credits the receiving bank’s account. Once the RBI confirms the credit, the receiving bank makes funds available to the beneficiary. Because each transaction settles one-to-one (gross) and instantly (real time), there is minimal settlement risk.
Types of RTGS
Although RTGS is a single, standardized system, transactions can be classified by who initiates them:
- Customer-Initiated RTGS: A corporate or individual asks their bank to send funds.
- Bank-Initiated RTGS: One bank transfers funds to another bank, often to settle its own inter-bank liabilities.
Feature of RTGS
RTGS offers several key features:
- Real-Time Settlement: Funds move instantly as soon as the transaction is processed.
- Gross Settlement: Each payment is settled individually, without netting against other payments.
- Final and Irrevocable: Once settled, transactions cannot be reversed.
- High-Value Transfers: Ideal for large amounts (minimum ₹2 lakh).
- Secure and Reliable: Operated by the RBI with strict controls.
Benefits of RTGS
RTGS brings many advantages, especially for businesses and financial institutions:
- Speed: Near-instant settlement reduces delay in fund availability.
- Safety: Direct settlement with the RBI minimizes credit risk.
- Transparency: Both sender and receiver get immediate confirmation.
- Efficiency: No waiting for batch processing; transactions clear individually.
- Reduced Risk: Gross settlement lowers systemic risk in the banking system.
Uses of RTGS
RTGS is widely used in India for:
- Corporate Payments: Salary disbursements, vendor invoices, and large supplier payments.
- Interbank Settlements: Banks settle large sums they owe to each other.
- Government Transactions: Tax collections and large government disbursements.
- High-Value Personal Transfers: Property purchase payments or large loan repayments.
Examples of RTGS
- A company pays its supplier ₹50 lakh through RTGS; funds arrive in minutes.
- A bank settles ₹100 crore of interbank borrowings at the RBI via RTGS.
- An individual transfers ₹3 lakh to a family member’s account in another city using net banking’s RTGS option.
RTGS Requirements
To use RTGS in India, you need:
- A Bank Account: With an RTGS-enabled bank branch.
- Minimum Amount: ₹2,00,000 per transaction.
- KYC Compliance: Proper identity and address verification.
- Beneficiary Details: Name, account number, bank’s IFSC code, branch address.
How to Do RTGS Online?
- Log In: Access your bank’s net banking portal or mobile app.
- Select RTGS: Choose the payment or funds transfer section, then pick RTGS.
- Enter Details: Fill in beneficiary name, account number, IFSC code, amount, and purpose.
- Authenticate: Use your transaction password, OTP, or digital token.
- Confirm and Submit: Review details and submit. You will receive an immediate reference number.
How to Do RTGS Offline?
- Visit Branch: Go to your bank’s branch where you hold the account.
- Fill RTGS Form: Ask for the RTGS remittance form and fill in payer and beneficiary details.
- Attach Cheque/Slip: Many banks need a cheque or debit slip for verification.
- Submit and Pay: Hand over the form and pay any applicable charges in cash or by debiting your account.
- Collect Receipt: The bank issues a stamped receipt with a unique transaction reference.
What are RTGS Timings?
RTGS in India is available 24 hours a day, 7 days a week, including holidays. This round-the-clock facility began on December 14, 2020, ensuring you can transfer high-value funds at any time.
What is RTGS Limit?
- Minimum Amount: ₹2,00,000 per transaction.
- Maximum Amount: No upper limit is prescribed by the RBI. However, banks may set a cap per customer per day as part of their internal policy.
What are RTGS Charges?
The RBI has capped the maximum charges that banks may levy on customers for outward RTGS transactions:
- Amount Transferred: ₹2 lakh to ₹5 lakh, Maximum Bank Charge (per transaction): ₹25.
- Amount Transferred: Above ₹5 lakh to ₹10 lakh, Maximum Bank Charge (per transaction): ₹50.
- Amount Transferred: Above ₹10 lakh, Maximum Bank Charge (per transaction): ₹100.
Note: Banks may choose to waive or reduce these fees as part of their service offerings.
How much time does it take for RTGS Transactions to Settle?
RTGS transactions settle immediately typically within a few seconds once your bank’s RTGS request is received and processed by the RBI.
Factors Affecting RTGS Settlement Time
Although RTGS is designed for instant settlement, a few factors can cause minor delays:
- Network Latency: Temporary slowdowns in bank or RBI servers.
- Bank Processing: Delays in validating transaction details at the branch or online portal.
- System Maintenance: Rare downtimes for software upgrades or backups.
- Incorrect Details: Errors in beneficiary account number or IFSC code leading to rejections.
Challenges of RTGS
While RTGS is powerful, it does have limitations:
- High Minimum Amount: Excludes small-value transactions.
- Cost: Charges may deter frequent usage for mid-range sums.
- Infrastructure Dependence: Requires stable internet and banking systems.
- Limited to Banks: Only bank-to-bank transfers; non-bank entities cannot access RTGS directly.
Components of RTGS
The RTGS ecosystem in India includes:
- RBI’s Central Processing System: The core where settlement takes place.
- Member Banks: All participating banks connected via secure network.
- SWIFT Network/IFSC: Messaging standards and codes that help route transactions.
- CRSS (Core Banking Systems): Bank-level software that initiates and tracks RTGS transactions.