What is RTGS? - Real Time Gross Settlement - Banking Info for banking exams

What is RTGS ?

The full form of RTGS is "Real Time Gross Settlement". RTGS can be defined as "the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting)".

In India, transfer of funds with RTGS is done for high value transactions, the minimum amount being Rs 2 lakh. The beneficiary account receives the funds transferred, on a real time basis. The main difference between RTGS and National Electronic Funds Transfer (NEFT) is that while transfer via NEFT takes place in batches (with settlements and transactions being netted off), in the case of RTGS, the transactions are executed individually and on gross basis.

Charges of RTGS

(a) Inward Transactions : Free, no charge to be levied;
(b) Outward Transactions: Rs 2 lakh to Rs 5 lakh - Not exceeding Rs.30/- per transaction; Above Rs 5 lakh - not exceeding Rs.55/- transactions;

In RTGS, transactions are processed continuously, all through the business hours. RBI’s settlement time is 9 am to 4:30 pm on weekdays and 9 am to 1:30 pm on Saturdays. Banks can function within this time frame or change it. Here, transfers made are quick and can be helpful in emergencies.

The customer initiating the funds transfer through RTGS has to have the Indian Financial System Code (IFSC) of the beneficiary's bank, along with the name of the beneficiary, account number and name of the bank. The bank branches, both at the initiating and receiving end, have to be RTGS-enabled for the transaction to be processed. Customers with Internet banking accounts can do RTGS transactions on their own.

How is RTGS different from NEFT?

• Timing: As mentioned above, Neft operates in hourly batches. Currently, it has 11 settlements from 9am to 7pm on weekdays and five settlements from 9am to 1pm on Saturdays. So, in case you initiate a transaction after a settlement time you have no option but to wait till the next settlement time. But that’s not the case with RTGS transactions, since they are processed constantly throughout the RTGS business hours.
• The service window for RTGS at banks is available from 9am to 4.30pm on week days and from 9am to 1.30pm on Saturdays for settlement at the RBI end. Keep in mind that the timings that each bank follows may vary.
• Amount: As far as Neft goes, it does not have a minimum or maximum limit of amount you can transfer. But the maximum amount per transaction is limited to Rs 50,000 for cash-based remittance and remittance to Nepal.
• As far as RTGS goes, it is mostly meant for large transactions. The minimum amount that can be remitted through it is Rs 2 lakh. RTGS does not have an upper ceiling for transactions.
• Charges: For Neft, inward transactions (when you receive funds via Neft) are free, as no charges are to be levied from the person to whom fund are being transferred to. When you use Neft to make an outward transaction (when you send funds via Neft) at a bank branch for amounts up to Rs 1 lakh, the charge is up to Rs 5 plus service tax. For transactions above Rs 1 lakh and up to Rs 2 lakh, the charge is up to Rs 15 plus service tax. for transactions above Rs 2 lakh, the charges can’t exceed Rs 25 plus service tax.