Full-Form of RTGS
The full form of RTGS Real Time Gross Settlement is the real-time (continuous) settlement of the funds (interbank payments) that are transferred on an individual basis without netting that is on order by order basis, and it is usually taken into use for transferring money/securities from one particular bank to the other on a real-time basis.
Why you Need RTGS?
There are various reasons that can justify the need for having real-time gross settlement:
#1 – Minimization of Risks
Real-time gross settlement systems are increasingly taken into use by central banks both nationally and internationally. RTGS systems help in the minimization of risks with respect to payment settlement that is high in value among banking institutions.
#2 – Protection of Sensitive & Confidential Information
Real-time gross settlements type mechanism even helps in the protection of the financial data and mitigating related risks by allowing it to become more vulnerable to fraudsters and criminals like hackers and social engineers for a limited time period.
#3 – Eliminates the Probability of Social Engineering
Real-time gross settlement systems protect the banking institutions from potential threats like phishing and social engineering, where hackers and criminals hack and obtain sensitive data and misuse the same, causing losses like finances and reputation.
#4 – Saves a Hell Lot of Time
RTGS system is the fastest interbank payment facility that is available through various banking channels, both nationally and internationally.
#5 – Irrevocable
This facility is meant solely for large value transactions. The payments made in real-time gross settlement mechanisms are final and irrevocable.
#6 – Zero Forgery
In real-time gross settlement systems, all the processes are done online, which means there is hardly any threat of money getting stolen or forgery with respect to cheques.
#7 – Better Management of Business Capital
RTGS systems help the organization in the better management of their business capital.
#8 – No Counter-Party Default Transactions
There are bare minimum possibilities for counter-party defaults to take place.
#9 – Saves Paperwork
Real-time gross settlement can be done without any physical documentation and paperwork. Huge sums of transfers can be made instantly without any paperwork.
#10 – Ensures the Smoother Flow of Operations for Companies
RTGS systems make it easy to transfer a huge sum of money. This, all and all, allow companies to operate smoothly.
#11 – Develops a Better Buyer-Supplier Relationship
With RTGS, a huge amount of payments are easily and quickly transferred, which eliminates the possibilities of delayed payments, which also helps in establishing the framework of a profound buyer-supplier relationship.
#12 – No Amount Cap
Real-time gross settlement transfers/transactions have no amount of cap.
#13 – Individual Basis
RTGS transfers/transactions can be executed on an individual basis.
#14 – Gross Basis
RTGS transfers/transactions can be executed by organizations on a gross basis.
#15 – Reliability
Real-time gross settlement systems are highly reliable.
#16 – Legal Backing
RTGS transfers/transactions have legal backing.
Pre-Requisites of using RTGS
The customer who is at the remitting front needs to furnish various kinds of information to a banking institution while initiating an RTGS transaction. The pre-requisites of using real-time gross settlement are enlisted below-
- The total amount that is to be used for remitting purposes
- The account number that has to be debited
- The details of the beneficiary bank, such as its name, branch name, etc
- The IFSC code of the branch that is supposed to receive the RTGS
- Beneficiary customer’s details (name, account number, etc.)
- In case if there is any other information that needs to be shared by the sender to the receiver.
What are the RTGS Timings?
- The real-time gross settlement does not work 24*7 hours. The system operates on all the days that is when most financial institutions are operating, including Saturdays. RTGS transfers/transactions can be executed only during certain banking operational hours.
- RTGS transfers/transactions occur from 9.00 am to 4.30 pm during the weekdays (excluding national holidays) and from 9.00 am to 2.00 pm during the weekends (Fridays and Saturdays).
- RTGS transfers/transactions might be a little restrictive for individuals who miss the designated time slot for the day. In such a case, the individual will have to wait for the next working day to make his or her payments.
What are the Limits of RTGS?
Real-time gross settlement transfers/transactions are primarily meant only for high-end transactions (large value transactions). The minimum amount that needs to be remitted for real-time gross settlement is Rs. 200,000, while the maximum amount is not applicable.
Are There Any Charges for RTGS?
RTGS transfers/transactions are done usually free of cost, and this is entire to encourage the use of digital transactions. However, to charge or not to charge depends on the banks. Many banking institutions are seen charging their customers for RTGS transfers/transactions. The amount charged by these banks is very basic and usually depends on the amount that is to be remitted. In the case of inward transactions, there is no fee or charges levied, while in the case of outward transactions, the fee depends on the total amount that is to be remitted. This amount is pre-decided, and it differs from range to range.
- Real-time gross settlement transactions are a credit-push system, which means the transactions are to be initiated solely by the remitter/payer/sender for transferring or remitting funds to the beneficiary customer (receiver).
- RTGS transactions occur in real-time, and it takes place on the basis of the transaction to the transaction (i.e., without netting).
- Real-time gross settlement transactions are quick and save a lot of time. This system also minimizes or eliminates the possibilities of data manipulation and ensures data protection. RTGS transactions are final and irrevocable.
- RTGS systems are safe, secure, and reliable systems of transferring funds. Real-time gross settlements happen for free; however, few banks may choose to charge a minimum fee for executing such transactions.
- The remitting customer must provide details like his name, account number, amount, date, name of the bank and its branch, IFSC code of the beneficiary branch, and name and account number of the receiving customer (beneficiary) for successfully making a remittance.
- Real-time gross settlement transactions must be done within the bank timings, or else the receiver and the sender will have to wait for the next working day for making a remittance.
This has been a guide to the Full form of RTGS, i.e. (Real-Time Gross Settlement) and definition. Here we learn why you need RTGS, what are RTGS timings, what are limits of RTGS along with the pre-requisites of using RTGS. You may refer to the following articles to learn more about finance –