Real Time Gross Settlement (RTGS)
RTGS is India’s high-value electronic funds transfer system, designed for real-time, irrevocable transfers. Launched in March 2004 by RBI, it was the country’s first system for large-value instant payments. RTGS is meant primarily for big-ticket transactions or urgent interbank payments, where speed and finality are crucial.
Definition and Mechanism
Real-Time Gross Settlement means each transaction is processed individually and immediately (without batching or netting) in central bank money. When a bank or customer issues an RTGS payment instruction, it is processed at that moment (real-time) and settled on a one-to-one basis (gross) across RBI’s books.
As the settlement happens in the RBI’s accounting system, once completed it is final and cannot be revoked. This guarantees that the funds credited to the beneficiary’s account are fully secure and final, with no risk of reversal due to interbank clearing issues.
Use Cases
RTGS is intended for large-value or time-critical transfers. The RBI set a minimum amount of ₹2 lakh for RTGS transactions, underscoring its use for big payments (such as corporate payments, high-value individual purchases like property, interbank transfers, and government payments).
There is no upper ceiling on RTGS – any amount above ₹2 lakh can be sent, making it ideal for very large payments. In practice, businesses often use RTGS for same-day large settlements, and individuals might use it for urgent needs like closing on a high-value purchase.
Availability
Initially, RTGS was available only during banking hours on weekdays. However, since December 14, 2020, RTGS is operational 24×7×365, including weekends and holidays. This round-the-clock availability, following the path of NEFT, has further enhanced its utility for urgent payments at any time.
Transactions are settled continuously throughout the day. If the RTGS system is ever temporarily unavailable, participants are promptly informed by RBI, but such occurrences are rare due to the system’s critical nature and robust design.
Speed and Finality
The hallmark of RTGS is speed – transfers are effected in real time (typically within seconds or minutes) provided the sending and receiving banks’ systems are functioning.
Because each transaction is settled individually in RBI’s books, finality is assured. Payments made via RTGS are final and irrevocable, which eliminates counterparty risk. This is particularly important for interbank settlements or urgent client transactions where the payee needs immediate usable funds without uncertainty.
Charges
In an effort to encourage digital payments, RBI has removed its processing charges for RTGS from July 2019. Banks are expected to pass on this benefit to customers. RBI has also prescribed maximum customer charges: for outward RTGS transactions between ₹2 lakh and ₹5 lakh, banks can charge no more than ₹25; for transactions above ₹5 lakh, not more than ₹50 (plus GST). Inward receipts (incoming RTGS credits) must be free for the beneficiary. Many banks have made RTGS free for online channels to promote usage.
RBI’s Role
RTGS is fully owned and operated by RBI as part of the Centralised Payment Systems (along with NEFT). The central bank provides the RTGS platform, maintains participant settlement accounts, and ensures adequate liquidity facilities. Because settlement occurs in central bank reserves, credit risk is minimal.
RBI continuously upgrades RTGS – for instance, the system was enhanced to NG-RTGS with ISO 20022 messaging standard for better features. RBI also acts as a regulator, issuing RTGS System Regulations and membership criteria. Over 1,60,000 bank branches are RTGS-enabled, covering all major banks. Non-banks like clearing houses and certain institutions have also been given access to RTGS for financial stability.
Real-Time vs. NEFT
A key difference between RTGS and NEFT is that RTGS does not wait to club transactions into batches. Each RTGS payment is processed instantly upon initiation, whereas NEFT payments queue until the next batch cycle. This makes RTGS suited for urgent needs despite typically higher transaction amounts, while NEFT handles high volumes of routine retail payments at lower cost. In summary, RTGS serves as the backbone for high-value settlements in India, providing speed, certainty, and security for critical transactions, and contributes to the smooth functioning of financial markets and large business operations.