Real-Time Gross Settlement means a continuous and settlement of funds that are transferred and a transaction which is individually processed (without netting). The RTGS process can be divided into two parts: real-time and gross settlement. Where real-time is refining the transaction, once they are received, and gross settlement is the settlement of funds and transferring of instructions which occur individually.
It gives safety and security to the funds’ transfer.
The funds transferred by RTGS have no amount specified in limit or limitation.
The system of RTGS is available on all days when most bank branches are functioning, including Saturdays.
No much real-time is involved in the transfer of funds to the beneficiary account.
No use of physical cheque or a demand draft by the remitter.
There is no necessity for the beneficiary to visit a bank’s branch for depositing the paper draft/ documents.
There is no fear of theft or loss of physical papers or fraudulent encashment to the beneficiary also.
The positive impact of RTGS is that the remitter can start the remittances/make a payment from anywhere, including home/workplace, by online banking if his/her bank offers such service.
RBI has put the cap-like charges on the transactions.
RTGS transaction has a legal check-up.
The electronic fund transfer system (NEFT) in which the transactions received up to a particular time which is processed in batches. Contrary to this, in RTGS, the trades are processed continuously on a transaction by transaction basis throughout the RTGS business hours.
RTGS was never a 24×7 system before the amendment of 2020. The transactions of RTGS are operational between specific time windows. The service windows for client RTGS transactions are available with banks from 7 am to 6 pm on the particular working day for settlement at the RBI end. It. Is important to note that the timings of the banks followed, varies from bank to bank.
The systems of RTGS are primarily meant for larger value/amount transactions. The minimum Amount which can be remitted via RTGS is ₹ 2, 00,000/, and there is no upper or maximum limit defined.
From July 01, 2019, onwards, the Reserve Bank (RBI) has given up the processing charges/fees which are levied over RTGS transactions. In such situations, the bank passes on the benefit to its customers/clients.
A framework has been made to, levy the service charge when offering funds via RTGS system; the mandatory charges are as follows:
|1.||Inward Transactions||Free and no charges|
|2.||Outward Transactions. Amounts of 2,00,000 to 5,00,000||Rs.24.50 not exceeding (exclusive of tax)|
|3.||Above Rs. 5,00,000||Rs 49.50and not exceeding (exclusive of tax)|
The banks are at liberty to charge not more than the rates prescribed by RBI.
The remitting customer/ Payer has to provide the following information to a bank, for commencing RTGS Remittances
a. The Amount to be remitted/transferred
b. For doing RTGS, provide with the Amount to be debited
c. Provide with the name of the beneficiary’s bank and branch details
d. IFSC code number of the beneficiary receiving branch
e. Give the name of the beneficiary customer
f. Provide with the Account number of the beneficiary /customer
g. It is important to fill the sender to receiver details/information.
The essential precautions to be taken while doing funds transfer via RTGS by remitter or Bank
It is essential to provide details of the Originating (paying) and destination (receiving) bank branches that are part of the RTGS network.
The beneficiary details such as beneficiary name, account number, and account type, name, and IFSC of the beneficiary bank branch has to be put or available with the remitter.
It is a Unique Transaction Reference (UTR) number, which is of a 22 character code, and it is used to uniquely identify a transaction in the RTGS system.
The amendment is accordance with Statement of developmental and regulatory Policies given by RBI.
The amendment on the October 9, 2020, has simplified the RTGS system. It has been made a 24*7 support system for the customers. The Real-time gross settlement will be round the clock. Also, there were no limits, no limitations, being round the clock year on all days. It will be coming into force from 00;30 hours from December 14, 2020 onwards.
It can be concluded that Real-time gross settlement (RTGS) is the continuous process of settling interbank transactions and payments on an individual order. It is the basis for across the books of a central bank. It can be checked that system’s process is opposed to netting debits with credits at the end of the day. RTGS is a setup for the larger value transactions which are between the interbank funds transfers. RTGS systems have tremendously increased and are used by central banks worldwide. It helps to minimize the risks related to high-value payment settlements among financial institutions.
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