What is RTGS

RTGS, or Real Time Gross Settlement, is a specialised electronic funds transfer system used for high-value transactions. It is a crucial component of the modern banking infrastructure that ensures real-time, one-to-one settlement of interbank transactions. RTGS is primarily employed for transferring large sums of money securely and swiftly. Banking and online payment platforms such as BBPS have made it easier and secure to make RTGS payments from the comfort of your home.

Benefits of RTGS

1. Faster transfers: Unlike NEFT, which settles funds in batches, RTGS offers real-time settlement, meaning your recipient gets the money immediately.
2. Security: RTGS leverages robust security protocols to minimise the risk of fraud or errors during transfers.
3. Wider availability: You can initiate RTGS transactions 24/7 on all days of the year, providing greater flexibility compared to traditional methods.
4. Large transactions: RTGS is designed to efficiently handle high-value transfers, making it ideal for significant financial transactions.

RTGS charges

While the precise charges associated with RTGS transactions can vary from one financial institution to another, there are some common practices and principles that govern these fees:

1. Sender's bank charges: Typically, the bank that initiates the RTGS transfer levies charges on the sender. These charges can either be a fixed amount or a percentage of the transaction value. The fee structure often depends on the sender's relationship with the bank, the transfer amount, and other factors.
2. Recipient's bank charges: In some cases, the recipient's bank may also impose a fee for receiving funds through RTGS. This fee can vary, and it is essential to check with the recipient's bank to understand their policies.
3. Government levies: Depending on the country and its financial regulations, there may be government-imposed levies or taxes associated with RTGS transactions. These charges are usually a percentage of the transaction value.
4. Intermediary bank charges: When the sender's bank and the recipient's bank are not part of the same RTGS network, an intermediary bank may be involved in the transaction. This intermediary bank might charge a fee for facilitating the transfer.

It is essential to review your bank's fee structure and any associated costs before initiating an RTGS transaction to avoid surprises.

RTGS transaction time

One of the most significant advantages of using the RTGS system is its real-time transaction processing. When you initiate an RTGS transfer, the funds are settled immediately. However, there are certain factors to consider when it comes to the exact transaction time:

1. Operating hours: RTGS operates during specific hours on business days, which vary from one country to another and can even differ between banks within the same country. Transactions initiated outside these hours are typically queued for processing on the next business day.
2. Transaction queue: If there is a high volume of RTGS transactions at a given moment, your transfer may be queued. In such cases, the funds will be settled in the order they were received.
3. Receiver's bank: The recipient's bank must also be operating and connected to the RTGS network to receive the funds immediately. If the recipient's bank is closed or not part of the RTGS network, the transaction may be delayed until they resume operations.

In general, RTGS is an ideal choice for time-sensitive transactions, especially for businesses and individuals who require quick, secure, and high-value fund transfers.

RTGS process

Understanding the process of an RTGS transaction is essential for both senders and recipients:

1. Initiation: The process begins when the sender, either an individual or a business, initiates a RTGS transaction. Customer can use a third-party application like the Bajaj Finserv BBPS platform to transfer the money or the bank’s official website. The sender provides the recipient's bank account details, including the bank's RTGS identifier or Bank Identifier Code (BIC).
2. Verification: The sender's bank verifies the transaction details and the availability of funds in the sender's account. Once everything checks out, the bank initiates the transfer.
3. Transmission: The sender's bank sends the transaction details to the RTGS system, which routes the request to the recipient's bank through secure channels. If an intermediary bank is involved, it processes the transaction accordingly.
4. Recipient's bank processing: The recipient's bank receives the transaction request and verifies the recipient's account information. If all checks are successful, the funds are immediately credited to the recipient's account.
5. Confirmation: Both the sender and recipient receive confirmation of the successful transaction. This confirmation typically includes details such as the transaction reference number, amount transferred, and the transaction timestamp.
6. Settlement: The settlement process ensures that the transaction is final, and the funds are irrevocably transferred from the sender's account to the recipient's account. This step is what makes RTGS transactions so secure.

RTGS payment: Significance and applications

RTGS payments play a critical role in various financial scenarios:

1. Business transactions: Companies often use RTGS for large-scale payments such as supplier invoices, salaries, and settling inter-company debts. Its real-time settlement ensures that these transactions are completed promptly.
2. Real estate: The purchase of high-value assets like real estate often involves RTGS payments. Buyers can be assured of the immediate transfer of funds to the seller.
3. Securities trading: RTGS is widely used in stock markets and other financial markets for settlement of securities transactions. It allows for a quick and secure transfer of funds between buyers and sellers.
4. Government transactions: Government entities utilise RTGS for various purposes, including disbursement of subsidies, pension payments, and the settlement of tax refunds.

RTGS, or Real-Time Gross Settlement, is a vital component of modern banking and finance. It provides a secure, real-time platform for the transfer of large sums of money, making it an indispensable tool for businesses, individuals, and financial institutions alike. Understanding its charges, transaction time, process, and significance can help individuals and organisations make informed decisions when it comes to high-value fund transfers.