Presentation on RTGS system

presented by-
Arun awasthi
Jaiprakash
Keshab
Content’s of RTGS system

 Background of RTGS
 Definition of RTGS system

 Advantage and disadvantage of RTGS

 RTGS different from NEFT

 Process of RTGS system

 IFSC &Remitting customer

 Impact of RTGS

 Procedure for a customer and charges in

RTGS
Background of RTGS
 In June 1998, the Reserve Bank of Australia (RBA)implemented
Real Time Gross Settlement (RTGS)
 purpose of achieving finality of payments and enhancing stability
in the financial and securities settlements can be completed have
changed.

 In india this system was launched on March 26, 2004 (on pilot
basis by involving 4 banks) by RBI for large value transactions for
banks and their clients.
 RBI expects 120 scheduled commercial banks and primary
dealers to become part of the real time gross settlement system
by June 2004.
Definition of RTGS

 RTGS system is a funds transfer mechanism where

transfer of money takes place from one bank to
another on a “real time” and on “gross” basis.
 This is the fastest possible money transfer system
through the banking channel.
 Settlement in “real time” means payment transaction is
not subjected to any waiting period. The transactions
are settled as soon as they are processed.
 “Gross settlement” means the transaction is settled on
one to one basis without bunching with any other
transaction.
Advantage & disadvantage of
RTGS
 Real-time Payment Settlement: Payments settled in
real time on a transaction-by-transaction basis, as
soon as they are accepted by the system.
 No Credit Risk :- There is no credit and settlement risk
involved in RTGS system for receiving participant as
each payment transaction is settled instantly.
 Predictability of Cash Flows:- RTGS facilitates
predictability of cash flows as customers know when
their accounts will be debited or credited.
 Benefits to Economy : The instant finality of payments
ensures fast, secure and irrevocable settlement of
major business and financial market transactions
Cont…..
 The only disadvantage of RTGS systems is the fact
that it requires more liquidity than net settlement
systems, as liquidity has to be available for each
individual payment.
 several way to mitigate this liquidity problem. The
system could have rules for how fast payments should
be made in the system.
 RTGS system and the participants can develop
queuing features, and algorithms that calculate the
order of which payments should be made in order to
get a smooth flow of payments
RTGS different from NEFT
NEFT is also an electronic funds transfer system that operates on deferred net
settlement (DNS) basis which settles transactions in batches. In DNS, the settlement
takes place at a particular point of time. All transactions are held up till that time.
NEFT Settlement take place 6 times a day during the week days (9.00 AM,11.00AM,
12.00 noon, 1.00PM, 3.00PM and 5.00 PM) and 3 times during Saturdays (9.00AM,
11.00 AM and 12.00 noon), Any transaction initiated after a designated settlement
time would have to wait till the next designated settlement time. Contrary to this, in
RTGS, transactions are processed continuously throughout the RTGS business
hours.
RTGS business hours:
Monday to Friday : 9.00 AM to 4.30 PM
Saturday : 9.00 AM to 12..30 PM
Process of RTGS

RTGS transaction diagram

IFSC
 The Indian Financial System Code (also known as IFSC) is a
11 digit code for identifying the bank and branch which an
account is held. The IFSC code is used both by the RTGS and
NEFT finance transfer systems.
 The code consists of 11 characters - first 4 characters (4!A)
represent the entity; fifth position has been defaulted with a '0'
(Zero) for future use; and the last 6 characters (6!X) denote the
branch identity.
 IFSC is being identified by the RBI as the code to be used for
various payment system projects within the country, and it would,
in due course, cover all networked branches in the country. In
due course, when all bank branches participate in electronic
payment systems, they would need to have a single identifiable
unique code and IFSC would serve the purpose effectively
Procedure for a customer and charges in
RTGS
 customer wants to use the RTGS, he will have to go to an
RTGS-enabled bank branch where he maintains his account and
give an online instructions for the funds to be credited to the
beneficiary’s account instead of using draft and cheque
 Presently, about 3000 branches at 275 locations in India meet
this criterion. RBI expects about 20000-25000 cheques which
involve high value customer transactions to migrate to RTGS.

a) Inward transactions – Free, no charge to be levied

b) Outward transactions –
` 2 lakh to `. 5 lakh - not exceeding ` 25 per transaction.
Above ` 5 lakh – not exceeding ` 50 per transaction
Remitting customer
The remitting customer has to furnish the following
information to a bank for effecting a RTGS remittance:
 Amount to be remitted
 Remitting customer’s account number which is to be
debited
 Name of the beneficiary bank
 Name of the beneficiary customer
 Account number of the beneficiary customer
 Sender to receiver information, if any
 The IFSC Number of the receiving branch
Impact of RTGS
 It is expected that some traditional products like cash
management for corporate customers and traditional
money transfer systems among branches.
 lose their significance with the RTGS in place and
banks may have to design other innovating products
for their customers. While a demand draft takes about
7 days, it takes about 1-2 days under EFT which is
available in 134 cities.
THANK YOU