Real Time Gross Settlement (RTGS): Full Form, What is RTGS, and How Does RTGS Work?

In today’s fast-paced world, waiting for a crucial payment to clear can be a major headache. Whether you’re a business owner finalizing a deal or an individual sending urgent funds, delays can disrupt your plans and cause unnecessary stress. But fear not! There’s a solution at hand: RTGS, or Real-Time Gross Settlement.

The RTGS system was first adopted by three central banks in 1985. Today, there are more than 110,000 RTGS-enabled bank branches, making it one of the most popular money transfer methods, owing to its capability of transferring funds on the same day.

In today’s world financial landscape, RTGS is critical in facilitating efficient and secure transactions, enabling the smooth and timely flow of capital and supporting the growth of businesses and the economy.  

Now let’s learn about what is RTGS, its full form, features and more in the upcoming sections.

What is RTGS?

RTGS stands for Real-Time Gross Settlement. It is one of the types of electronic payment systems that facilitate instant and secure transfer of funds between banks in India. RTGS is generally used for large transfers, such as interbank settlements, government payments, and high-value business transactions.

Think of it as an express service for moving money between banks, ensuring swift and reliable transfers.

Here’s how RTGS is described:

• Real-time: Funds are transferred immediately, typically within seconds or minutes.
• Gross settlement: Each transaction is settled individually and in full, without grouping it with other payments.

Central banks or financial authorities are in charge of the management and operation of RTGS systems for seamless and secure transactions. RTGS payments have an extremely high level of security, which makes them resistant to counterparty risks. The SWIFT system is an essential part of modern finance, and it speeds up and secures global funds transfer.

Now, as you are already aware of the meaning of RTGS, let’s learn some of the important benefits.

What are the Benefits of RTGS (Real Time Gross Settlement)?

There are several benefits of RTGS, so let’s discuss them in detail:

• The role of RTGS in reducing the risks in high-value payment settlements between financial institutions is particularly critical.
• Central banks worldwide increasingly adopt RTGS systems due to their effectiveness in bolstering financial security.
• Due to the nature of real-time settlement, RTGS minimises the window of opportunity for hackers to obtain critical financial data.
• RTGS dramatically decreases the level of cybersecurity risks, such as social engineering, phishing and data theft, by minimising the exposure of critical information.
• By enabling immediate and final settlement of transactions, RTGS systems contribute to overall financial security by reducing the likelihood of successful cyber attacks on sensitive financial information. 

What are the Features of RTGS?

Real-Time Gross Settlement is an electronic payment system that comes with many valuable features. 

• Real-Time Online Fund Transfer: Money can be transferred in real-time from one bank to another via RTGS; thus, the system is referred to as RTGS because it allows for real-time gross settlement from one bank to another.
• Suited for High-Value Transactions: The RTGS is usually used for a high amount above a certain amount, such as ₹ 2 lakh. It is better to use for a large business sum, property transaction, or a considerable amount transfer.
• Safe and Secure, with RBI’s Backing: RTGS is safe and secure because the Reserve Bank of India protects it, and there is no possibility of fraud and error. 
• Quick Settlement: RTGS provides the facility of quick money settlement because the payment is settled within 2 hours, and the payments are reflected quickly on the beneficiaries’ end.
• Available 24×7: Round-the-clock availability of RTGS is another important feature. You can begin RTGS transfers at any point in time, day or night, as the system is available for use 24/7. 

Read More About: Features of RTGS

How Does RTGS Works?

Let’s understand how do RTGS work in this section in detail:

• Initiation: RTGS starts working when you initiate the transfer at your bank by providing the recipient’s bank details, account number, and transfer amount.
• Verification: The bank will confirm that you have enough money in your bank account to cover the transfer.
• Central Bank Involvement: After the verification, the message is forwarded to the central bank that is acting as an intermediary between the two entities.
• Real-Time Transfer: The central bank quickly responds by verifying the funds and instantly transfers them from your account at the central bank to the recipient’s bank account.  This happens in real-time, typically within seconds or minutes.
• Beneficiary Bank Update: Recipient’s bank will be informed about the incoming funds by the central bank through the notification message.
• Completion: The recipient’s bank receives a credit transfer of the amount the sender sent. Both you and the recipient receive notifications about the completed transaction.

Different Methods to Initiate RTGS Transactions in India

Here are the different methods to initiate RTGS transfers:

• Internet banking: Most banks offer online banking services, and you can log in to your account to initiate an RTGS transfer online. In this case, you select the option, enter the name of the beneficiary, amount, and other required details, and then complete the process.
• Mobile banking apps: In today’s digital world, you can now use your mobile banking app to initiate RTGS transactions as quickly as ever. These apps have been developed to simplify the process and enable you to make RTGS transfers from your mobile internet or tablet.
• Bank branch: If you are more of a traditional person, you can go to your bank branch and initiate the RTGS transfer in person. The bank staff will help you fill in the form and necessary details, verify them, and process the transaction on your behalf.

What are the Details Required for RTGS Payment? 

One of the features of RTGS that make it particularly relevant for modern consumers is that the transactions can be initiated through net banking.

To do so, consumers require the beneficiary’s information so that the transfer can be made to the correct individual.

Some of this information includes:

• The name of the individual or beneficiary
• The beneficiary’s bank IFSC code
• The beneficiary’s account number
• The beneficiary’s bank branch and bank name

Interestingly, consumers can also schedule their RTGS payments a few days in advance. This makes it extremely convenient for employers and organisations to transfer large funds to high-value employees.

How to do RTGS Fund Transfer Online?

• Login to Net Banking: Go to your bank’s Internet banking website and log in using your credentials.
• Navigate to Transfers: Then, look for the “Fund Transfer” or “Payments” section to check out the available options.
• Initiate RTGS Transfer: Choose “RTGS” as the transfer method. If RTGS is not displayed as one of the options, you can choose “Interbank Transfer” or any other option that may seem related.
• Add Beneficiary: For the first transfer to the recipient, you will need to add this person as a beneficiary. Please proceed with adding the recipient’s bank account details along with the beneficiary’s name and IFSC code.
• Enter Transfer Details: Then, you will need to provide the amount of money you want to transfer along with any optional reference.
• Review and Confirm: Make sure to recheck all the details, such as the beneficiary and the sum you are going to transfer. If everything is correct, proceed by confirming.
• Authentication: Your bank will send you a one-time password to verify your identity. Be ready to enter the received OTP.
• Confirmation: As a result, you will receive a verification of a transaction along with a reference number, and the recipient will be notified instantly.

Read More: How to Do Fund Transfer Using RTGS?

What are the RTGS Transaction Charges? 

There are no charges for RTGS transactions. To promote digital payments, RBI scrapped all RTGS charges, irrespective of the bank.

What are the Timings for RTGS Payments? 

Update: From December 2020 onwards, RTGS transactions will be allowed 24×7, 365 days a year.

Unlike UPI transactions, RTGS ones can only take place within banking hours.  

In that sense, RTGS payments can be slightly restrictive as individuals who miss this time slot must wait until the next day to make their payments.

• Weekdays: Transactions can occur anytime between 9:00 am and 4:30 pm
• Weekends: Transactions can occur anytime between 9:00 am and 2:00 pm

However, considering that RTGS is not intended for daily payments the way UPI is, these RTGS timings are not a very big problem.

Another essential factor to consider is that not everyone can make RTGS payments.

One must have an account with a bank that is RTGS-enabled to make such payments.

Read More: RTGS Transfer Timings in India for 2024

RTGS Transaction Limits in India

• Minimum Amount: RTGS has a minimum limit of ₹ 2 lakh (2,00,000) in India. This ensures that only high-value transactions are processed and there is less traffic on the RTGS system.
• RTGS Limit Per Day via Bank Branch: RTGS is not subject to any upper limit when bank branches are concerned. This implies that you can send any amount above the minimum limit without any restrictions.
• RTGS Limit Per Day via Internet Banking: In the case of an RTGS transaction through internet banking, an upper limit is usually set. The majority of banks will impose this limit at ₹ 25 lakh (25,00,000). Some banks have higher limits, while others limit it on the lower side of the estimate for internet banking.

Example of a Real-Time Gross Settlement System?

Let’s understand the RTGS with the help of an example. Suppose a customer wants to transfer money to another bank’s account, which involves the use of RTGS. In such a case, the funds move from the customer’s account to the receiver’s account immediately after the initiation process.

In a real-time gross settlement system, the transfer occurs instantaneously upon initiation, with funds being transferred immediately from the customer’s account to the recipient’s account, in contrast to ACH (Automated Clearing House) transfers, whereby funds may take a few days to clear due to the batching procedure which takes time before the settlement is finalised. The speed and efficiency of clearing and settlement make it suitable for high-value transactions requiring urgency. 

How is RTGS different from National Electronic Funds Transfer (NEFT)?

The transactions done via NEFT are processed in batches. In RTGS, it’s the contrary; transactions are processed continuously on a transaction-by-transaction basis throughout the RTGS business hours.

Read More: RTGS vs NEFT – Which One Should You Use to Transfer Money

Important Points to be Noted

When filling out the Real-Time Gross Settlement (RTGS) form, it is essential to keep certain points in mind to avoid errors and ensure a successful transaction. The form contains terms and conditions related to the RTGS transfer, which must be read carefully. One of the most common conditions is that the bank must follow the Reserve Bank of India’s guidelines regarding RTGS.

Furthermore, it is important to note that the amount can only be transferred to the bank account mentioned in the form, and the applicable RTGS fees and taxes will be deducted from the remitter’s account. If the beneficiary’s details are incorrect, the bank will not be responsible for any issues.

The remitter must select the preferred method if the form is for both NEFT and RTGS transfers. Failure to do so will result in the bank making the decision, with NEFT being used for amounts less than Rs. 2 lakh and RTGS for amounts over Rs. 2 lakh. Hence, reading and understanding the form’s instructions before submitting it is crucial to ensure a successful transaction. If you want to read more about the comparison of RTGS vs NEFT, you can check out the blog RTGS vs NEFT.

Conclusion

As a means to promote digital transactions, RBI has scrapped transaction fees for all RTGS transactions, regardless of your bank.

RTGS fund transfer is an easy, quick, and efficient method of transferring funds from one account to another.

This method is the most reliable and popular choice when the fund transfer is for a large amount of money.

Having said that, if one wants the ease of making payments at any given time, then perhaps RTGS is not the way to go unless you can be sure that all your payment needs can be taken care of within banking hours.

Frequently Asked Questions (FAQs)

1. What is the RTGS full form? 

The full form of RTGS is Real Time Gross Settlement; it is an electronic funds transfer mechanism banks and financial institutions use to transfer money from one account to another in real-time.

2. What is the minimum amount for RTGS? 

The minimum amount for making transactions is ₹ 200,000, whereas no limit has been set for the maximum amount.

3. How much time does RTGS take? 

RTGS is conducted in “real-time,” implying that the scheduled transaction is executed immediately within seconds. 

4. Can RTGS be done without a Cheque? 

Making an RTGS transaction is possible without a check. You can accomplish this digitally via mobile apps or by logging in to the internet banking facility provided by your bank.

5. How to fill out an RTGS cheque? 

To fill out an RTGS cheque, follow these steps:

• When filling out an RTGS cheque, one should take the following steps: 
• Mention the date on the cheque indicating the RTGS transaction date.
• In the capacity of “PAY”, put “YOURSELF FOR RTGS”. 
• Specify the price to be transferred both in words and figures. 
• Include the details such as mobile number and signature. 
• It is crucial to mention all the details accurately for the beneficiary. 
• Give the information necessary, including the bank details of the transaction code. 
• Sign the cheque and submit it to the bank for the necessary process.

6. Can I do RTGS from a non-home branch? 

Yes, RTGS may be done through a non-home branch. However, there may be some changes depending on the bank’s policies.

7. How can I check my RTGS status?

You can check the status of your RTGS transaction by checking via bank, using the net banking facility or mobile app.

8. How can I use RTGS offline? 

RTGS can be done offline by visiting the closest bank branch and completing the RTGS transactions offline. This ensures that those without internet or mobile banking can transfer money using RTGS.

9. What are the disadvantages of RTGS? 

The disadvantages of RTGS include:

• The necessity of a demand draft or a cheque when transacting through a branch,
• The restricted access to Internet banking (the maximum limit for this is Rs. 25 lakh).

10. Is it possible to plan an RTGS transaction in advance?

Yes, RTGS transactions can be planned in advance. The transaction can be initiated online or offline, and you must submit the necessary details to the bank. Subsequently, the bank will proceed with the transaction processing at the specified time.

11. How to fill out the RTGS form?

1. Please obtain an RTGS form from your bank.
2. Fill in your details: account number, amount to be transferred, beneficiary details.
3. Confirm the accuracy of the info given.
4. Fill the form as required.
5. Attach all the documents to the application form and send it to the bank.
6. Receive the confirmation of the transaction.
7. Make sure to keep the form as evidence.