Q1. What is RTGS System?

Ans. The acronym 'RTGS' stands for Real Time Gross Settlement. RTGS system is a funds
transfer mechanism where transfer of money takes place from one bank to another on a 'real
time' and on 'gross' basis. This is the fastest possible money transfer system through the banking
channel. Settlement in 'real time' means payment transaction is not subjected to any waiting
period. The transactions are settled as soon as they are processed. 'Gross settlement' means the
transaction is settled on one to one basis without bunching with any other transaction.
Considering that money transfer takes place in the books of the Reserve Bank of India, the
payment is taken as final and irrevocable.

Q2. How RTGS is different from Electronic Fund Transfer System (EFT) or National
Electronics Funds Transfer System (NEFT)?

Ans .EFT and NEFT are electronic fund transfer modes that operate on a deferred net settlement
(DNS) basis which settles transactions in batches. In DNS, the settlement takes place at a
particular point of time. All transactions are held up till that time. For example, NEFT settlement
takes place 6 times a day during the week days (9.00 am, 11.00 am, 12.00 noon. 13.00 hours,
15.00 hours and 17.00 hours) and 3 times during Saturdays (9.00 am, 11.00 am and 12.00 noon).
Any transaction initiated after a designated settlement time would have to wait till the next
designated settlement time. Contrary to this, in RTGS, transactions are processed continuously
throughout the RTGS business hours.

Q3. Is there any minimum / maximum amount stipulation for RTGS transactions?

Ans. The RTGS system is primarily for large value transactions. The minimum amount to be
remitted through RTGS is Rs.1 lakh. There is no upper ceiling for RTGS transactions. No
minimum or maximum stipulation has been fixed for EFT and NEFT transactions.

Q4. What is the time taken for effecting funds transfer from one account to another under
RTGS?

Ans. Under normal circumstances the beneficiary branches are expected to receive the funds in
real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to
credit the beneficiary's account within two hours of receiving the funds transfer message.

Q5. Would the remitting customer receive an acknowledgement of money credited to the
beneficiary's account?

Ans The remitting bank receives a message from the Reserve Bank that money has been credited
to the receiving bank. Based on this the remitting bank can advise the remitting customer that
money has been delivered to the receiving bank.

Q6. Would the remitting customer get back the money if it is not credited to the
beneficiary's account? When?
Ans. Yes. It is expected that the receiving bank will credit the account of the beneficiary
instantly. If the money cannot be credited for any reason, the receiving bank would have to
return the money to the remitting bank within 2 hours. Once the money is received back by the
remitting bank, the original debit entry in the customer's account is reversed.

Q7. Till what time RTGS service window is available?

Ans. The RTGS service window for customer's transactions is available from 9.00 hours to 16.30
hours on week days and from 9.00 hours to 12.30 noon on Saturdays for settlement at the RBI
end. However, the timings that the banks follow may vary depending on the customer timings of
the bank branches.

Q8. What about Processing Charges/Service Charges for RTGS transactions?

Ans With a view to rationalize the service charges levied by banks for offering various electronic
products, a broad framework has been mandated as under:

a) Inward transactions – Free, no charge to be levied

b) Outward transactions –

Rs. 1 lakh to Rs. 5 lakh - not exceeding Rs. 25 per transaction.

Rs. 5 lakh and above – not exceeding Rs. 50 per transaction.

Q9. What is the essential information that the remitting customer would have to furnish to
a bank for the remittance to be effected?

Ans. The remitting customer has to furnish the following information to a bank for effecting a
RTGS remittance:

1. Amount to be remitted
2. His account number which is to be debited
3. Name of the beneficiary bank
4. Name of the beneficiary customer
5. Account number of the beneficiary customer
6. Sender to receiver information, if any
7. The IFSC Number of the receiving branch

Q10. How would one know the IFSC code of the receiving branch?

Ans. The beneficiary customer can obtain the IFSC code from his branch. The IFSC code is also
available in the cheque leaf. This code number and bank branch details can be communicated by
the beneficiary to the remitting customer.

Q11. Do all bank branches in India provide RTGS service?

Ans. No, all the bank branches in India are not RTGS enabled. As on December 31, 2008 more
than 52,000 bank branches are RTGS enabled. The list of such branches is available on RBI
website www.rbi.org.in/Scripts/Bs_viewRTGS.aspx

Q12. Is there any way that a remitting customer can track the remittance transaction?

Ans It would depend on the arrangement between the remitting customer and the remitting bank.
Some banks with internet banking facility provide this service. Once the funds are credited to the
account of the beneficiary bank, the remitting customer gets a confirmation from his bank either
by an e-mail or by a short message on the mobile.

Q13. Whom do I can contact, in case of non-credit or delay in credit to the beneficiary
account?

Ans Contact your bank / branch. If the issue is not resolved satisfactorily, the Customer Service
Department of RBI may be contacted at -

The Chief General Manager,

Reserve Bank of India,
Customer Service Department,
1st Floor, Amar Building, Fort,
Mumbai - 400001
or send and email.

Q14. How much volume and value of transactions are routed through RTGS on a typical
day?

Ans On a typical day, RTGS handles about 60,000 transactions a day for an approximate value
of Rs.2,700 billion.

Q15. How can a remitting customer know whether the bank branch of the beneficiary
accepts remittance through RTGS?

Ans. For a funds transfer to go through RTGS, both the sending bank branch and the receiving
bank branch would have to be RTGS enabled. The lists are readily available at all RTGS enabled
branches. Besides, the information is available at RBI website
(www.rbi.org.in/Scripts/Bs_viewRTGS.aspx). Considering that more than 52,000 branches at
more than 10,000 cities/ towns and taluka places are covered under the RTGS system, getting
this information would not be difficult.
Real Time Gross Settlement
From Wikipedia, the free encyclopedia
Jump to: navigation, search

Real time gross settlement systems (RTGS) are funds transfer systems where transfer of money
or securities[1] takes place from one bank to another on a "real time" and on "gross" basis.
Settlement in "real time" means payment transaction is not subjected to any waiting period. The
transactions are settled as soon as they are processed. "Gross settlement" means the transaction is
settled on one to one basis without bunching or netting with any other transaction. Once
processed, payments are final and irrevocable.

[edit] Existing systems

Below is a listing of countries and their RTGS systems:

• Albania - AECH, RTGS

• Australia - [RITS]
• Bulgaria - RINGS (Real-time INterbank Gross-settlement System)
• Brazil - STR (Sistema de Transferência de Reservas)
• Canada - LVTS (Value Transfer System) (This is actually an RTGS Equivalent system.
Final settlement happens in the evening.)
• China - China National Advanced Payment System ("CNAPS") (also called "Super
Online Banking System)[2]
• Chile - LBTR/CAS (Spanish: Liquidación Bruta en Tiempo Real)
• Croatia - HSVP (Croatian: Hrvatski sustav velikih plaćanja)[3]
• Czech Republic - CERTIS (Czech Express Real Time Interbank Gross Settlement
System)
• Hong Kong - Clearing House Automated Transfer System (CHATS)
• Hungary - VIBER (Hungarian: Valós Idejű Bruttó Elszámolási Rendszer)
• India - RTGS
• Indonesia - Sistem Bank Indonesia Real Time Gross Settlement (BI-RTGS)
• Iran - SATNA (Real-Time Gross Settlement System)
• Israel - Zahav (Credit and Transfers in Real Time)[4]
• Japan - BOJ-NET (Bank of Japan Financial Network System)[5]
• Kuwait - KASSIP (Kuwait's Automated Settlement System for Inter-Participant
Payments)
• Malaysia - RENTAS (Real Time Electronic Transfer of Funds and Securities)
• Nigeria - NAGSS (Nigerian Automated Gross Settlement System)
• Macedonia - MIPS (Macedonian Interbank Payment System)[6]
• Peru - LBTR (Spanish: Liquidación Bruta en Tiempo Real)
• Philippines - PhilPaSS [2]
• Poland - SORB[3]
• Russia - BESP system (Banking Electronic Speed Payment System)[4]
• România - ReGIS system [5]
 • Saudi Arabia - (Saudi Arabian Riyal Interbank Express) SARIE [6]
• Singapore - MEPS+ (MAS Electronic Payment System Plus)
• South Africa - SAMOS (The South African Multiple Option Settlement) [7]
• Switzerland - SIC (Swiss Interbank Clearing) [8]
• Thailand - BAHTNET (Bank of Thailand Automated High value Transfer Network)
• Turkey - EFT (Electronic Fund Transfer)
• United Kingdom - CHAPS (Clearing House Automated Payment System)
• United States - Fedwire

RTGS systems covering multiple countries:

• TARGET resp. TARGET2 (Trans-European Automated Real-time Gross Settlement

Express Transfer System) in 26 countries of the European Union

TARGET2 is the Real Time Gross Settlement system for the Euro currency, and is offered by the
Eurosystem, which comprises the European Central Bank and the National Central Banks of
those countries that have adopted the Euro currency. The Eurosystem and the European System
of Central Banks will co-exist as long as there are EU Member States outside the Euro area.

TARGET2 is used for the settlement of central bank operations, large-value Euro interbank
transfers as well as other euro payments. TARGET 2 provides real-time financial transfers, debt
settlement at central banks which is immediate and irreversible.

This "electronic" payment system is normally maintained or controlled by the Central Bank of a
country. There is no physical exchange of money; the Central Bank makes adjustments in the
electronic accounts of Bank A and Bank B, reducing the amount in Bank A's account by $1000
and increasing the amount of Bank B's account by the same.

The RTGS system is suited for low-volume, high-value transactions. It lowers settlement risk,
besides giving an accurate picture of an institution's account at any point of time.

Such systems are an alternative to systems of settling transactions at the end of the day, also
known as the net settlement system such as BACS. In the net settlement system, all the inter-
institution transactions during the day are accumulated. At the end of the day, the accounts of the
institutions are adjusted. Extending the example above, say another person deposits a check
drawn on Bank B in Bank A for $500. At the end of the day, Bank A will have to
"electronically" pay Bank B only $500 ($1000 - $500).

The implementation of RTGS systems by Central Banks throughout the world is driven by the
goal to minimize risk in high-value electronic payment settlement systems.

In an RTGS system, transactions are settled across accounts held at a Central Bank on a
continuous gross basis. Settlement is immediate, final and irrevocable. Credit risks due to
settlement lags are eliminated.
RTGS does not require Core Banking to be implemented across participating banks, since
transactions are direct, with no central processing or clearing operations. Any RTGS employs
two sets of queues: one for testing outgoing funds availability on a chronological FIFO basis
with the option of prioritizing specific inquiries, while the other queue is for processing
debit/credit requests received from the cenral bank's Integrated Accounting System].

Overview of RTGS systems

1.1 Main features of RTGS systems

Definition. An RTGS system is defined in this report as a gross settlement system in which both
processing and final settlement of funds transfer instructions can take place continuously (i.e. in real time).
As it is a gross settlement system, transfers are settled individually, that is, without netting debits against
credits. As it is a realtime settlement system, the system effects final settlement continuously rather than
periodically at prespecified times provided that a sending bank has sufficient covering balances or credit.
Moreover, this settlement process is based on the realtime transfer of central bank money. An RTGS
system can thus be characterised as a funds transfer system that is able to provide continuous intraday
finality for individual transfers.

Payment processing. Within this broad definition, the operational design of RTGS systems can differ
widely. In particular, important differences may arise in the approaches to payment processing when the
sending bank does not have sufficient covering funds in its central bank account. One possible way of
treating transfer orders in such circumstances is for the system to reject the orders and return them to the
sending bank. The rejected transfer orders will be input into the system again at a later time when the
sending bank has covering funds. Until that time, sending banks may keep and control the pending
transfers within their internal systems (internal queues). Alternatively, the RTGS system may temporarily
keep the transfer orders in its central processor (system or centrally located queues) instead of rejecting
them. In this case, the pending transfers will be released for settlement when covering funds become
available on the basis of predefined rules, agreed between the system and the participating banks.

In many cases the transfer orders are processed and settled with the extension of central bank credit,
normally provided for a period of less than one business day (intraday credit); in other words, the central
bank provides banks with the necessary covering funds at the time of processing by extending such credit.
The central bank could take a range of approaches to the provision of intraday credit in terms of (a) the
amount of credit (including a zero amount), (b) the method by which credit is extended (e.g. overdraft or
repo), (c) the terms on the credit (e.g. free or priced) and (d) the collateral requirements (if any).

These possibilities of payment processing (i.e. rejected, centrally queued, settled with central bank credit)
are not necessarily mutually exclusive. For example, when the provision of central bank credit is
constrained in some way, the transfer orders for which the sending bank could/would not obtain central
bank credit will be rejected or centrally queued. In recent years, new or planned RTGS systems have
tended to apply a combination of these possibilities rather than being based on only one form of payment
processing.

Ability to limit payment system risks. RTGS systems can contribute substantially to limiting payment
system risks. With their continuous intraday final transfer capability, RTGS systems are able to minimise
or even eliminate the basic interbank risks in the settlement process.

More specifically, RTGS can substantially reduce the duration of credit and liquidity exposures. To the
extent that sufficient covering funds are available at the time of processing, settlement lags will approach
zero and so the primary source of risks in interbank funds transfers can be eliminated. Once settlement is
effected, the receiving bank can credit the funds to its customers, use them for its own settlement
purposes in other settlement systems or use them in exchange for assets immediately without facing the
risk of the funds being revoked. This capability also implies that, if an RTGS system were linked to other
settlement systems, the realtime transfer of irrevocable and unconditional funds from the RTGS system to
the other systems would be possible. The use of RTGS could therefore contribute to linking the settlement
processes in different funds transfer systems without the risk of payments being revoked.

As a corollary of the benefits of RTGS in interbank funds transfers, applying RTGS to funds transfers in an
exchange-for-value settlement system can contribute to the reduction of the credit risk (principal risk) that
may arise in such a system. Since RTGS permits the final transfer of funds at any time during the day
(subject to the availability of covering funds), the final transfer of funds (the payment leg) can be
coordinated with the final transfer of assets (the delivery leg) so that the one takes place if and only if the
other also takes place. It is in this context that RTGS can provide an important basis for a DVP or PVP
mechanism, thereby contributing to the reduction of settlement risk in securities and foreign exchange
transactions.

Importantly, RTGS systems can offer a powerful mechanism for reducing systemic risk. As central banks
have a common interest in limiting systemic risk, this capability has often been the key motive for many
central banks to adopt RTGS in largevalue transfer systems. The appeal of RTGS in terms of systemic
risk containment may be better understood by breaking it down into separate elements. First, the
substantial reduction of intraday interbank exposures could significantly lower the likelihood that banks
may become unable to absorb losses or liquidity shortfalls caused by the failure of a participant in the
system to settle its obligations. Second, RTGS precludes the possibility of unwinding payments, which can
be a significant source of systemic risk in net settlement systems. Third, since banks can, in principle at
least, make final funds transfers at the time of their choice during the day, settlement pressures are not
concentrated at particular points in time. This makes it likely that banks will have more time to cope with
problems (for example, a liquidity or solvency problem of a participant in the system), possibly by raising
alternative funds or through the receipt of incoming transfers from other participants.

Intraday liquidity requirements. Provided that there are no legal problems with regard to settlement
finality, the only structural impediment to continuous intraday finality is any liquidity constraint a sending
bank may face during the day. A liquidity constraint in an RTGS environment has two basic
characteristics, namely that it is a continuous constraint for settling funds transfers and that intraday
liquidity requirements must be funded by central bank money; banks must therefore have sufficient
balances in their central bank accounts throughout the processing day.

Intraday liquidity requirements raise important issues for both the central bank and the private sector.
Central banks, for their part, face a choice as to whether or not to provide banks with intraday liquidity and,
if so, what form that provision will take (e.g. by what mechanisms and on what terms the credit will be
provided, and how any resulting exposures will be managed).

From the perspective of individual banks, intraday liquidity requirements may lead to concern about the
associated costs. Such "liquidity costs" may include direct funding costs (interest paid or any other explicit
monetary costs such as charges/fees on central bank credit), opportunity costs of maintaining funds in
central bank accounts (e.g. interest forgone), or opportunity costs of tying up collateral or securities in
obtaining central bank credit. Furthermore, banks may have to be actively involved in the management of
their payment flows in order to use intraday liquidity effectively. This could require investment in the
internal systems that they use to control payment flows, as well as entailing running costs.

The intraday liquidity requirements under a particular RTGS system depend critically on (a) the structure
of financial markets and systems (e.g. the adequacy of private sector sources of liquidity, the amount of
collateral/securities available, reserve requirement regimes) and (b) the central bank's policy regarding the
provision of intraday credit. The means by which intraday liquidity is provided can significantly affect the
extent to which immediate, or at least very timely, final settlement occurs, and, ultimately, it can influence
the balance between the potential benefits and costs of RTGS systems. 1.2 Overview of G10 RTGS
systems

In the G10 countries, the first automated RTGS system was Fedwire in the United States. The modern
version of Fedwire, based on a computerised, highspeed electronic telecommunications and processing
network, was launched in 1970. By the end of the 1980s, six G10 countries had introduced RTGS systems
or largevalue transfer systems with an RTGS facility. These systems were FA in the Netherlands (1985),
RIX in Sweden (1986), SIC in Switzerland (1987), EILZV in Germany (1987), BOJNET in Japan (1988)
and BISS in Italy (1989). In the 1990s, further new RTGS systems have been introduced, while some of
the existing systems have recently upgraded their risk management capabilities and system architecture.
For example, the Federal Reserve started charging a fee for intraday (daylight) overdrafts in Fedwire as
from April 1994, while SIC was updated to introduce prioritisation facilities into the centrally located
queuing in July 1994. New RTGS systems include CHAPS in the United Kingdom, which previously
operated as a net settlement system but became an RTGS system in April 1996, and ELLIPS in Belgium,
which came into operation in September 1996. In France TBF is under development. In Italy and the
Netherlands the existing systems (BISS and FA) will be replaced by completely redesigned systems
known as BIREL and TOP respectively. According to current plans, RTGS systems will eventually be in
operation in all G10 countries except Canada by late 1997.

As summarised in the comparative table in Annex 1, the design of G10 RTGS systems differs
considerably. For example, the systems can be divided broadly into two groups - systems without a central
bank intraday credit facility and systems with a central bank intraday credit facility. The systems belonging
to the former group are SIC (Switzerland) and BOJNET (Japan). In SIC, transfer orders are temporarily
held in the centrally located queue if covering funds are not sufficient and are processed on the basis of
the FIFO ("first in, first out") rule subject to assigned priorities upon the availability of funds, while in BOJ-
NET uncovered transfer orders are rejected and returned to the sending bank.

In the remaining G10 RTGS systems, central banks (will) provide intraday credit. In ELLIPS (Belgium),
EILZV (Germany), BIREL (Italy), TOP (Netherlands), RIX (Sweden) and Fedwire (United States), intraday
credit is or will be extended through intraday overdraft facilities. Intraday overdrafts must be fully
collateralised in all of these systems except Fedwire. In Fedwire an institution that incurs an overdraft is
charged a fee based on its average daily overdraft and the size of the overdraft is limited according to a
predetermined cap; collateral is required in certain rare cases and when an institution frequently exceeds
its cap by material amounts solely on account of bookentry securities transactions. In CHAPS (United
Kingdom), the central bank does not allow overdrafts but instead provides intraday liquidity through
intraday repos; a similar approach will be adopted in TBF (France). In both these cases repos have been
chosen largely for reasons associated with the legal status of the central bank's claim on the securities
provided.

Besides SIC, centrally located queues are or will be provided in ELLIPS, EILZV, TBF, BIREL, TOP and
RIX, although their architecture shows considerable diversity. CHAPS is based primarily on internal
queues; it is for each bank to decide the nature of the payment flow control process (and any associated
algorithm) to be applied to transfer orders in an internal queue. Anecdotal information suggests that
internal queuing arrangements are also used by some larger participants in Fedwire. Furthermore, it is
also reported that many large banks use internal queuing processes even in RTGS systems with centrally
located queuing (e.g. SIC and BIREL). This suggests that participants in RTGS systems often actively
manage their own payment flows.
Real Time Gross Settlement
The acronym 'RTGS' stands for Real Time Gross Settlement.The Reserve Bank of India (India's
Central Bank) maintains this payment network. RTGS system is a funds transfer mechanism
where transfer of money takes place from one bank to another on a 'real time' and on 'gross'
basis. This is the fastest possible money transfer system through the banking channel. Settlement
in 'real time' means payment transaction is not subjected to any waiting period. The transactions
are settled as soon as they are processed. 'Gross settlement' means the transaction is settled on
one to one basis without bunching with any other transaction. Considering that money transfer
takes place in the books of the Reserve Bank of India, the payment is taken as final and
irrevocable.

Fees for RTGS vary from bank to bank. Both the remitting and receiving must have Core
banking in place to enter into RTGS transactions. Core Banking enabled banks and branches
have assigned RTGS 11-character alphanumeric codes, which are required for transactions along
with recipient's account number.

RTGS is a large value (minimum value of transaction should be Rs. 1,00,000) funds transfer
system whereby financial intermediaries can settle interbank transfers for their own account as
well as for their customers. The system effects final settlement of interbank funds transfers on a
continuous, transaction-by-transaction basis throughout the processing day. Customers can
access the RTGS facility between 9 am to 4:30 pm on week days and 9 am to 12 noon on
Saturday [1].

The statistics of transactions for the month of March 2004 shows that in the interbank market
transactions involving 45,000 instruments and aggregating Rs. 1,79,000 crore (1,790 billion)
were settled. High value instruments (3,17,000) settlement aggregated Rs. 2,74,000 crore
(2,740 billion). However, settlement of MICR instruments (145 lakhs) accounted for only
Rs. 54,000 crore (540 billion). RTGS will eliminate settlement risk in the case of interbank and
high value transactions.

Banks could use balances maintained under the cash reserve ratio (CRR) instead of the intra-day
liquidity (IDL) to be supplied by the central bank for meeting any eventuality arising out of the
real time gross settlement (RTGS). The RBI fixed the IDL limit for banks to three times their net
owned fund (NOF).

The IDL will be charged at Rs 25 per transaction entered into by the bank on the RTGS platform.
The marketable securities and treasury bills will have to be placed as collateral with a margin of
five per cent. However, the apex bank will also impose severe penalties if the IDL is not paid
back at the end of the day.
The RTGS service window for customer's transactions is available from 9.00 hours to 16.30
hours on week days and from 9.00 hours to 12.30 noon on Saturdays for settlement at the RBI
end. However, the timings that the banks follow may vary depending on the customer timings of
the bank branches.

[edit] National Electronic Fund Transfer

National Electronic Fund Transfer (NEFT) is an online system for transferring funds of Indian
financial institution (especially banks). This facility is used mainly to transfer funds below
Rs. 1,00,000.

The Reserve Bank of India has instructed banks that they should not use RTGS for amounts
below Rs 1 lakh (100 thousand). The new rule came into effect on 1 January 2007. For small
transactions, RBI has asked banks to offer National Electronic Fund Transfer (NEFT) which
provided T+0 and T+1 settlement system (depending on the time a customer gives instruction to
the bank for transferring the fund).

[edit] Comparison
The key difference between RTGS and NEFT is that while RTGS is on gross settlement basis,
NEFT is on net settlement basis. Besides, RTGS facilitates real-time ("push") transfer, while
NEFT involves six settlement cycles a day 9:00 am, 11:00 am, 12:00 pm, 1:00 pm, 3:00 pm and
5:00 pm on week days and three settlements at 9:00 am, 11:00 am and 12:00 pm on Saturdays.
Thus if a customer has given instruction to its bank to transfer money through NEFT to another
bank in the morning hours, money would be transferred the same day, but if the instruction is
given later during the day, money would be transferred next day.

However, RTGS facility is available in over 25,000 branches, while NEFT is available in 51,219
branches of 88 banks (as of 25 October 2008)[2]. Besides, while all commercial banks have put in
place the RTGS facility, only 43 banks have purchased the software required to facilitate NEFT
based transaction. RBI has instructed banks that all branches which are RTGS enabled should
also provide NEFT by December 2006. Sources said that RBI also had planned to discontinue
EFT (electronic funds transfer). This is because EFT is available only in 15 locations where RBI
has its clearing house.

The minimum transaction value for RTGS is Rs. 1,00,000,[3] whereas there is no minimum value
for NEFT.[4]