If you want to transfer funds to someone across the country, you have a lot of options available to do so. But if you want to transfer large amount, then you have quite limited options. One such option is RTGS or Real Time Gross Settlement. It is a fund transfer mechanism that allows real time processing and settlement of requests for fund transfers. The system ensures that the funds reach the receiver immediately after a certain period, as in some other payment modes. The settlement of the request is based on instructions and not on batch clearing. The Reserve Bank of India keeps track of all transfers and thus all successful transfers are irreversible.
What are RTGS? (What is RTGS?)
Real-time gross settlement (RTGS) is an electronic form of fund transfer where transmission takes place on a real-time basis.
In India, transfer of funds with RTGS is done for high value transactions, with a minimum amount of Rs 2 lakh. The beneficiary receives the money transferred on a real-time basis. The main difference between RTGS and National Electronic Funds Transfer (NEFT) is that the transfer through NEFT takes place in batches, while in RTGS, transactions are executed individually and on a gross basis.
The customer initiating funds transfer through RTGS should have the Indian Financial System Code (IFSC) of the beneficiary’s bank, as well as the beneficiary’s name, account number and bank name. To initiate and receive bank branches, the transaction must be RTGS-enabled. Customers with Internet banking accounts can do RTGS transactions on their own.
History of RTGS (History of RTGS?)
The first system similar to the RTGS system was the US Fedwire system, which was launched in 1970. The system was an evolution of the previous telegraph-based system, which was used to electronically transfer funds between US Federal Reserve banks. In 1984, both the United Kingdom and France implemented the RTGS type system.
By 1985, three central banks had implemented the RTGS system, while by the end of 2005, the RTGS system was implemented by 90 central banks.
How RTGS Works
Real-time gross settlement is a system commonly used for large-value interbank fund transfers. These often require immediate and complete clearing and are usually conducted by a country’s central bank.
Real-time gross settlement minimizes settlement risk, as interbank settlement typically occurs in real time throughout the day – rather than at the end of the day all together. This eliminates the risk of a lag in completing the transaction. (Settlement risk is often called Delivery Risk.) RTGS can often charge higher fees than bundled and net payment procedures.
Limitations of RTGS
According to the Reserve Bank of India, individuals can request for RTGS starting from 9 am to 4:30 pm. But on Saturday, the time varies slightly, it is available from 9 am to 2 pm. It provides time for RBI transactions. However, the actual time provided by banks may vary.
RTGS is mainly designed for large value fund transfers. As per the rules and regulations set by the Reserve Bank of India, you cannot initiate RTGS request (Request) for transactions below Rs. 2 lakhs. Saying that, there are no upper limit restrictions on RTGS based fund transfers.
RTGS allows you to transfer money to any person in any part of the country. There are some charges in the fund transfer mechanism that you will have to pay to initiate an RTGS request. For all fund transfer requests between Rs.2 lakhs and Rs.5 lakhs, banks can charge a maximum of Rs.30 per transaction from their customers. For transactions above Rs.5, RBI has fixed Rs.55 per transaction.
To initiate an RTGS request, you have to submit some details to your bank or branch. These details include beneficiary name, amount to be sent, beneficiary account number, sender account number, contact information if needed and IFSC code. For online RTGS services, websites usually have an IFSC locator so that you can search the same. Apart from this, you can visit the RBI website to get the list of branches and their IFSC code. Once you fill the RTGS form with these details, you are able to fulfill the RTGS request (Request). Also, you cannot request RTGS from any bank or branch in the country. The branch must be part of the RTGS network or must have RTGS enabled to process the request. The RBI website lists all banks that are enabled with RTGS facilities.
Individuals having bank accounts can easily request for RTGS payments, either at a branch or through net banking. Many banks are providing online RTGS services to their customers, so that they can make the transfer hassle free and easy.
Normal time for transfer and receipt of ( Usual time for transfer and Acknowledgement)
The RTGS arrangement is to ensure that the fund transfer is close to immediate. Sometimes it can take a few minutes, depending on certain factors. RBI mandates the branch on receivers to credit the amount in the account within 30 minutes of receiving the funds. These days most banks provide information to their customers via SMS or email after coming to RTGS. Thus, you can expect from the bank that when the amount is deposited in the beneficiary’s account, you will send a notification to it. Some banks provide the ability to track the status of RTGS through their website or net banking facility.
Is there a possibility of failures? ( Are there any chances of failures?)
RTGS is only a different method of fund transfer, there are some situations where request may fail. Passive receiver account or frozen receiver account are the most common culprits behind RTGS request failure. In such a situation, the amount will be sent back to the account and from there to the sender’s account. This usually occurs within one hour of the request or by the end of the RTGS working day. In case of failures, the refund is basically there and you don’t have to worry about anything. But in extreme cases where the beneficiary does not receive the money within the stipulated time.
How is it different from NEFT? ( How is it different from NEFT?)
Both NEFT and RTGS are payment modes, making customers’ lives easier. You can use NEFT for all small transactions, while RTGS should only be used for large value transactions. The NEFT system works on an accumulation and disbursement system, where all requests are queued. They are then cleared on predefined settlement slots. NEFT operates on an hourly basis while RTGS operates on an instruction basis. The two services also have different charges. Thus, depending on your needs, you can choose either. For immediate transfers of large amounts to an individual within the country, RTGS are the preferred option.
- Real-time gross settlement (RTGS) is an electronic form of fund transfer.
- RTGS is used only for large value transactions. Its minimum amount is Rs 2 lakh.
- The customer initiating funds transfer through RTGS should have the Indian Financial System Code (IFSC) of the beneficiary’s bank, as well as the beneficiary’s name, account number and bank name.
- The first system similar to the RTGS system was the US Fedwire system, which was launched in 1970.
- According to the Reserve Bank of India, individuals can request for RTGS starting from 9 am to 4:30 pm.