What is RTGS: Full Form, Benefits and How Does RTGS Work?

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What is RTGS?

‘RTGS’ stands for Real-Time Gross Settlement, an electronic payment system that facilitates instant and secure fund transfers between banks in India. RTGS is typically used for large and time-sensitive transfers, processed individually and continuously throughout the day.

Under RTGS, each transaction is settled individually and in full without netting, offsetting or grouping it with other payments. Central banks or financial authorities oversee the entire process. This ensures that the payment system has an extremely high level of security, making it resistant to counterparty risks.

Benefits and Features of RTGS (Real Time Gross Settlement)

Risk Reduction: RTGS helps reduce the risks involved in high-value payment settlements between financial institutions.
Enhanced Financial Security: Due to their effectiveness in strengthening financial security, central banks worldwide are more frequently adopting RTGS systems.
Real-Time Settlement: RTGS transactions are settled in real-time, which protects financial data by reducing the time window during which it is susceptible to hackers.
Cybersecurity Mitigation: RTGS mitigates cybersecurity dangers like social engineering, phishing, and data theft by minimizing the risk of exposing critical information.
Regulated Transaction Charges: The RBI has capped transaction charges, and each transaction is legally backed.
Real-Time Online Fund Transfer: Money can be transferred electronically in real-time from one bank to another via RTGS.
Suited for High-Value Transactions: RTGS is usually used for high amounts above a certain threshold, such as ₹2 lakh.
Safe and Secure: With RBI backing this system, the risk of security breaches or fraudulent transactions is almost zero.
Quick Settlement: Under RTGS, payments are settled within 2 hours and are quickly reflected on the beneficiaries’ end.
Available 24×7: You can initiate RTGS transfers at any time of the day or night.

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.

Ways to Initiate RTGS Transactions

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 Payments?

To ensure a successful RTGS transfer, you’ll need to provide the following information to your bank:

Amount to be remitted: The exact amount you wish to transfer. This amount should be within the acceptable limits for RTGS transactions set by your bank (typically high-value transfers).
Remitting Account Details: Your unique bank account number linked to the debiting account.

Beneficiary Details:

Beneficiary Name: The full name of the person or entity receiving the funds.
Beneficiary Account Number: The recipient’s unique bank account number where the funds will be credited.
Beneficiary Bank Name: The official name of the bank where the recipient’s account is held.
Beneficiary Bank IFSC Code: Similar to yours, the 11-digit IFSC code specific to the beneficiary’s bank branch.

Additional Information (might vary by bank):

Sender to Receiver Information (Optional): Some banks allow you to include a reference number or any additional details for the recipient.
Sender and Beneficiary Legal Entity Identifier (LEI) (for eligible transactions): The Legal Entity Identifier (LEI) is a unique 20-digit code assigned to companies and other legal entities. It might be required for specific high-value transactions depending on your bank’s regulations.

How to do a 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.

What are the RTGS Transaction Charges?

The Reserve Bank of India (RBI) no longer charges for RTGS transactions itself, but banks can set their own service fees within a framework they established. Here’s a breakdown:

Inward Transactions: These are free for the recipient, as mandated by the RBI. Banks cannot levy any charges for receiving money via RTGS.
Outward Transactions: Banks can charge a service fee for initiating an RTGS transfer, but it must be within the limits set by the RBI. These limits are:
- Transactions between ₹2 lakh and ₹5 lakh: Not exceeding ₹25 (exclusive of any taxes)
- Transactions above ₹5 lakh: Not exceeding ₹50 (exclusive of any taxes)

Important Notes:

These are the maximum limits set by the RBI. Your bank might offer lower fees for RTGS transactions.
Always check your bank’s website or mobile app for their specific RTGS charges before initiating a transfer. This will ensure you’re aware of the exact cost involved.

What are the Timings for RTGS Payments?

Effective December 2020, the Reserve Bank of India (RBI) has enabled 24/7 availability for RTGS transactions throughout the year. This signifies a significant improvement in accessibility for large value transfers within India. However, it is essential to note that individual banks may have brief maintenance windows during which RTGS processing might be temporarily suspended.

For example:

State Bank of India (SBI): Offers 24/7 RTGS processing with the exception of a scheduled maintenance window between 11:50 PM and 12:30 AM.
HDFC Bank: Similar to SBI, HDFC Bank offers 24/7 RTGS processing except for a maintenance window between 11:30 PM and 12:30 AM.
Axis Bank: Axis Bank provides 24/7 availability for RTGS transactions. On weekdays, transactions initiated between 7:00 AM and 7:00 PM are processed in real-time. Transactions initiated between 7:00 PM and 7:00 AM are processed the following business day.

To ensure a smooth transfer experience, we highly recommend verifying the specific RTGS availability and processing times with your respective bank before initiating a transaction.

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.

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.

Important Points to be Noted Before an RTGS Transaction

Review Terms: Briefly skim the RTGS form to understand your bank’s terms and conditions, which usually align with RBI guidelines. This ensures a smooth transaction.
Double-Check Details: Accuracy is key! Verify all beneficiary information, including account number, name, and IFSC code. Errors can lead to delays or failed transfers. Your bank is not responsible for incorrect details.
Choose Your Method (if offered): Some forms might offer both NEFT (for smaller transfers) and RTGS options. Choose based on urgency. Otherwise, the bank will decide (NEFT for < ₹2 lakh, RTGS for > ₹2 lakh).

Conclusion

The Real-Time Gross Settlement (RTGS) system offers a secure and efficient way to transfer large sums of money electronically within India, with the added convenience of 24/7 availability. This means you can initiate and complete RTGS transactions any day of the week, including weekends and holidays. Thanks to the RBI’s removal of transaction fees, RTGS is an even more attractive option for large value transfers. For smaller, immediate transfers, consider alternative methods like NEFT or UPI.

Frequently Asked Questions (FAQs)

1. What types of transactions are typically done using RTGS?

RTGS is generally used for high-value transactions such as:

Interbank settlements
Government payments
High-value business transactions (e.g., property purchases)

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. What happens if I enter incorrect beneficiary details?

It’s crucial to ensure all beneficiary details are accurate to avoid delays or errors. The bank is not responsible for issues arising from incorrect information provided. Double-check all details before submitting your RTGS request.

5. 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.

6. How can I find the IFSC code of the receiving branch?

The Reserve Bank of India (RBI) maintains a publicly accessible list of IFSC codes which is updated on a regular basis: https://www.rbi.org.in/Scripts/IFSCMICRDetails.aspx. However, it’s generally easier to obtain the code directly from the beneficiary or through your bank’s resources.

7. 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.

8. 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.

9. Can I get compensation for a delayed refund of a failed payment?

In some cases, yes. If your bank takes an unreasonably long time to return a failed payment (such as a declined transaction or a reversed charge), you might be eligible for compensation. The compensation rate might be based on the prevailing repo rate set by the central bank, often with an additional percentage (e.g., repo rate + 2%)

10. Whom should I approach for raising a dispute/complaint related to an RTGS transaction?

Contact Your Bank: This is the first step. Reach out to your bank’s customer service department through their phone number or secure website login.

Escalate to the RBI Ombudsman Scheme (RB-IOS): If you’re not satisfied with your bank’s response, you can escalate the complaint to the RBI Ombudsman Scheme. You can file a complaint online through the RBI’s website.

11. 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.

12. 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).

13. 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.

14. How to fill out the RTGS form?

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