RTGS Real-Time Payment System www.deekpay.com

What is RTGS

RTGS is known in English as Real Time Gross Settlement. It is a remittance system that allows funds to be transferred from one bank account to another in real time and on a full settlement basis. The term "real-time" implies that transactions through RTGS are processed as soon as they are initiated by the sender, and "full settlement" implies that the order for the transfer of funds occurs on a one-to-one basis. RTGS is a continuous process of settling payments on an individual order basis, eliminating the need to net debits and credits on the books of a central bank. Once completed, the real-time fully settled payment is final and irrevocable. In most countries, these systems are managed and operated by their central banks.

How RTGS works

When you hear the term "real-time", it means that settlement occurs immediately upon receipt. So, in simple terms, transactions are settled at the receiving bank as soon as they are transferred from the sending bank. Full settlement means that transactions are processed and settled individually, so multiple transactions are not bundled or grouped together. This is the basis of a real-time full settlement system.

RTGS systems are typically used for large interbank fund transfers that are operated and organised by a country's central bank. These transfers usually require immediate and complete clearing. As noted above, once a transaction is cleared, it cannot be cancelled.

In 1970, the US Fedwire system came online. It was the first system similar to the Real Time Full Settlement System. It was an evolution of the telegraph-based system for transferring funds electronically between Federal Reserve banks.

The British system is known as the Clearing House Automated Payments System (CHAPS) and is currently operated by the Bank of England. France and other eurozone countries use a system called the Trans-European Automated Real-time Gross Settlement Express Transfer System (TARGET2). Other developed and developing countries have also introduced their own RTGS-type systems.

Overall, real-time full settlement reduces settlement risk (also known as delivery risk) because interbank settlements typically occur in real time throughout the day, rather than simply all at the end of the day. This eliminates the risk of delays in completing transactions. RTGS typically incurs higher fees than bundling and netting processes.

Features of RTGS

Here's everything you need to know about transferring funds through RTGS -

Transactions via RTGS are processed on a one-to-one basis RTGS facilities can be accessed at any time, any day of the year Real-time full settlement is mostly used for large transactions RTGS service can be used both online and offline. To process a transaction through RTGS, the following details must be provided Transfer amount Bank account number Beneficiary's Name Bank Branch Beneficiary's IFSC Beneficiary's bank branch

Benefits of RTGS

The increasing use of RTGS systems by central banks around the world can help minimise the risk of large payment settlements between financial institutions. While companies and financial institutions that handle sensitive financial data typically have a high level of security measures in place to protect information and funds, the scope and nature of online threats is constantly evolving.

Real-time full settlement can help mitigate threats by reducing the window of time in which critical information is vulnerable to attack. Two common examples of cybersecurity threats to financial data are social engineering or phishing (where people are tricked into revealing their information) and data theft (where hackers use it to obtain data and sell it to others).