The Real Time Gross Settlement System (RTGS) is set to be accessible around the clock from December 2020. This move by the Reserve Bank of India (RBI) aims to facilitate timely and seamless payment options for businesses and institutions in India, enhancing the ease of doing business and encouraging the growth of digital transactions.
Understanding RTGS
The RTGS system facilitates real-time money transfers into a beneficiary’s account. The term ‘real time’ refers to instant processing of instructions as soon as they’re received. ‘Gross settlement’ signifies that fund transfer instructions are settled individually. The system is primarily used for high-value transactions.
Current Scenario
At present, the RTGS service is accessible from 7:00 a.m. to 6:00 p.m. on all working days, excluding the second and fourth Saturdays of each month.
The 24x7x365 RTGS Decision
The RBI has decided to make the RTGS system available round the clock on all days from December 2020. This initiative will allow swift and seamless payments for domestic businesses and institutions in real-time. The National Electronic Funds Transfer (NEFT) system followed a similar transition in December 2019. In addition, from July 2019, charges for transactions conducted through NEFT and RTGS were ceased to boost digital transactions across the nation.
Significance of the Change
The full-time availability of RTGS will stimulate innovations in the large value payments ecosystem, thus promoting ease of doing business. Moreover, the change will aid in the global integration of Indian financial markets and assist India’s endeavors to form international financial centers. With this implementation, India becomes one of the few nations worldwide to maintain a 24x7x365 high-value real-time payment system.
RTGS vs NEFT
RTGS is primarily used for large-value instant fund transfers, while the NEFT system is generally utilized for fund transfers of up to Rs. 2 lakh. The minimum amount one can remit through RTGS is Rs. 2,00,000 with no upper or maximum limit. On the other hand, there is no limit imposed by the RBI for funds transferred through the NEFT system. However, banks might establish their own restrictions based on a risk perception approved by their boards.
The functioning of these two systems also differs. NEFT operates as an electronic fund transfer system wherein transactions received up to a specific time are processed in batches. Conversely, in RTGS, transactions are continuously processed on a transaction-by-transaction basis during the RTGS business hours.