The term “real-time gross settlement (RTGS)” refers to a funds transfer system that allows for the instantaneous transfer of money and/or securities. RTGS is the continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank. Once completed, real-time gross settlement payments are final and irrevocable. In most countries, the systems are managed and run by their central banks.
The RTGS system was first adopted by three central banks in 1985. Today, there are more than 110,000 RTGS-enabled bank branches, making it one of the most popular money transfer methods, owing to its capability of transferring funds on the same day.
In today’s world financial landscape, RTGS is critical in facilitating efficient and secure transactions, enabling the smooth and timely flow of capital and supporting the growth of businesses and the economy.
What is RTGS?
RTGS stands for Real-Time Gross Settlement. It is one of the types of electronic payment systems that facilitate instant and secure transfer of funds between banks in India. RTGS is generally used for large transfers, such as interbank settlements, government payments, and high-value business transactions.
Think of it as an express service for moving money between banks, ensuring swift and reliable transfers.
Here’s how RTGS is described:
- Real-time: Funds are transferred immediately, typically within seconds or minutes.
- Gross settlement: Each transaction is settled individually and in full, without grouping it with other payments.
Central banks or financial authorities are in charge of the management and operation of RTGS systems for seamless and secure transactions. RTGS payments have an extremely high level of security, which makes them resistant to counterparty risks. The SWIFT system is an essential part of modern finance, and it speeds up and secures global funds transfer.
Benefits of RTGS (Real Time Gross Settlement)
- The role of RTGS in reducing the risks in high-value payment settlements between financial institutions is particularly critical.
- Central banks worldwide increasingly adopt RTGS systems due to their effectiveness in bolstering financial security.
- Due to the nature of real-time settlement, RTGS minimises the window of opportunity for hackers to obtain critical financial data.
- RTGS dramatically decreases the level of cybersecurity risks, such as social engineering, phishing and data theft, by minimising the exposure of critical information.
- By enabling immediate and final settlement of transactions, RTGS systems contribute to overall financial security by reducing the likelihood of successful cyber attacks on sensitive financial information.
Features of RTGS
- Real-Time Online Fund Transfer: Money can be transferred in real-time from one bank to another via RTGS; thus, the system is referred to as RTGS because it allows for real-time gross settlement from one bank to another.
- Suited for High-Value Transactions: The RTGS is usually used for a high amount above a certain amount, such as ₹ 2 lakh. It is better to use for a large business sum, property transaction, or a considerable amount transfer.
- Safe and Secure, with RBI’s Backing: RTGS is safe and secure because the Reserve Bank of India protects it, and there is no possibility of fraud and error.
- Quick Settlement: RTGS provides the facility of quick money settlement because the payment is settled within 2 hours, and the payments are reflected quickly on the beneficiaries’ end.
- Available 24×7: Round-the-clock availability of RTGS is another important feature. You can begin RTGS transfers at any point in time, day or night, as the system is available for use 24/7.
How Does RTGS Works?
Step 1: Initiation Process
The first step is the initiation process, where the payer (sender) here first initiates an RTGS transaction by providing the necessary details, including the recipient’s (payee’s) bank account number, name, and the amount to be transferred. Then the payer’s bank verifies the availability of funds in their account.
Step 2: Verification of Settlement Message
After the initiation process, the RTGS system receives the settlement message and verifies the authenticity and accuracy of the information. It performs essential checks such as validating the sender’s account, ensuring compliance with regulatory requirements, and confirming the availability of funds.
Step 3: Funds Transfer
When the settlement message is verified, the RTGS system authorises to debit from the sender’s account for the transaction amount and simultaneously credits the recipient’s account with the same amount. This transfer of funds happens instantly.
Step 4: Confirmation
After the funds are transferred, the RTGS system generates confirmations for both the sender and the recipient. These confirmations usually include transaction details, such as the transaction reference number, timestamp, and the updated account balances of the sender and recipient.
What are the uses of RTGS?
– Real Estate Transactions: RTGS is often utilised where significant amounts of money are involved, such as in real estate transactions. It ensures swift and secure funds transfer for property purchases, sales, and other related transactions.
– High-priority Payments: One of the reasons why RTGS payment is the most reliable in need of the time is because it’s super convenient as it is also meant to use during high-priority situations. This works well when an immediate settlement is required, such as emergency healthcare, salary payments, or disaster relief funds and even when a critical supplier payment is required.
– International Transfers: In some cases, RTGS systems can facilitate transfers between banks in different countries. Bilateral or multilateral arrangements between countries enable real-time funds settlement, improving international payments’ efficiency.
– Government Transactions: RTGS is often used for various government-related transactions, including payment of taxes, customs duties, subsidies, pensions, and other government-to-individual or government-to-government payments.
Different Methods to Initiate RTGS Transactions in India
- Internet banking: Most banks offer online banking services, and you can log in to your account to initiate an RTGS transfer online. In this case, you select the option, enter the name of the beneficiary, amount, and other required details, and then complete the process.
- Mobile banking apps: In today’s digital world, you can now use your mobile banking app to initiate RTGS transactions as quickly as ever. These apps have been developed to simplify the process and enable you to make RTGS transfers from your mobile internet or tablet.
- Bank branch: If you are more of a traditional person, you can go to your bank branch and initiate the RTGS transfer in person. The bank staff will help you fill in the form and necessary details, verify them, and process the transaction on your behalf.
FAQs
What is the RTGS full form?
The full form of RTGS is Real Time Gross Settlement; it is an electronic funds transfer mechanism banks and financial institutions use to transfer money from one account to another in real-time.
What is the minimum amount for RTGS?
The minimum amount for making transactions is ₹ 200,000, whereas no limit has been set for the maximum amount.
Can RTGS be done without a Cheque?
Making an RTGS transaction is possible without a check. You can accomplish this digitally via mobile apps or by logging in to the internet banking facility provided by your bank.
Practice area's of B K Goyal & Co LLP
Income Tax Return Filing | Income Tax Appeal | Income Tax Notice | GST Registration | GST Return Filing | FSSAI Registration | Company Registration | Company Audit | Company Annual Compliance | Income Tax Audit | Nidhi Company Registration| LLP Registration | Accounting in India | NGO Registration | NGO Audit | ESG | BRSR | Private Security Agency | Udyam Registration | Trademark Registration | Copyright Registration | Patent Registration | Import Export Code | Forensic Accounting and Fraud Detection | Section 8 Company | Foreign Company | 80G and 12A Certificate | FCRA Registration |DGGI Cases | Scrutiny Cases | Income Escapement Cases | Search & Seizure | CIT Appeal | ITAT Appeal | Auditors | Internal Audit | Financial Audit | Process Audit | IEC Code | CA Certification | Income Tax Penalty Notice u/s 271(1)(c) | Income Tax Notice u/s 142(1) | Income Tax Notice u/s 144 |Income Tax Notice u/s 148 | Income Tax Demand Notice | Psara License | FCRA Online
Company Registration Services in major cities of India
Company Registration in Jaipur | Company Registration in Delhi | Company Registration in Pune | Company Registration in Hyderabad | Company Registration in Bangalore | Company Registration in Chennai | Company Registration in Kolkata | Company Registration in Mumbai | Company Registration in India | Company Registration in Gurgaon | Company Registration in Noida | Company Registration in lucknow
Complete CA Services
RERA Services
Most read resources
tnreginet |rajssp | jharsewa | picme | pmkisan | webland | bonafide certificate | rent agreement format | tax audit applicability | 7/12 online maharasthra | kerala psc registration | antyodaya saral portal | appointment letter format | 115bac | section 41 of income tax act | GST Search Taxpayer | 194h | section 185 of companies act 2013 | caro 2020 | Challan 280 | itr intimation password | internal audit applicability | preliminiary expenses | mAadhar | e shram card | 194r | ec tamilnadu | 194a of income tax act | 80ddb | aaple sarkar portal | epf activation | scrap business | brsr | section 135 of companies act 2013 | depreciation on computer | section 186 of companies act 2013 | 80ttb | section 115bab | section 115ba | section 148 of income tax act | 80dd | 44ae of Income tax act | west bengal land registration | 194o of income tax act | 270a of income tax act | 80ccc | traces portal | 92e of income tax act | 142(1) of Income Tax Act | 80c of Income Tax Act | Directorate general of GST Intelligence | form 16 | section 164 of companies act | section 194a | section 138 of companies act 2013 | section 133 of companies act 2013 | rtps | patta chitta