Quick Guide to What is RTGS & its 5 most Important Features.
What is RTGS?
What is the complete form of RTGS?
What are the timings of RTGS?
What are the limits?
What is the difference between RTGS & NEFT?
These are some of the most common questions we have in mind when transferring our money from one bank to another bank.
RTGS was one of the first significant steps by RBI to bring fast and paperless money transfers between banks.
So let us start by understanding What is RTGS?
RTGS(Real-Time Gross Settlement) refers to a funds transfer system that allows for the instantaneous transfer of money from one account to another account held in different Banks.
It is an alternative to the traditional Cheque Based Transaction wherein person 1 issues a cheque of Bank A to person 2, who has an account with Bank B. Person 2 then deposits this Cheque to his/her Bank & Bank B presents it to Bank A for funds. You can read more about Cheque Based Clearing System here.
Whereas for RTGS transaction to take place, nor the beneficiary but the remitter approaches his Bank & initiates the transaction.
The transaction can be done in both online & offline mode.We will talk about it in detail later.
A cheque-based clearing system is time-consuming & has a lot of paperwork involved; however, Real-Time Gross Settlement (RTGS) is one of the processes that settle payments to the recipient on an instant basis without waiting for the settlement to happen.
RTGS services are irrevocable once the settlements are done.
Real-time gross settlements are used for high-value inter-bank transactions. These transactions typically need instant and complete clearing and are generally done by the country’s central bank.
Reserve Bank of India has been maintaining it here in India.
It provides a faster transaction period and helps minimize the risk involved in high-value transactions made by users.
To understand it further let us look at the 5 most important features of Real Time Gross Settlement-
1.RTGS is a Wire Transfer
2.RTGS is meant for high-value transactions
3.RTGS can be done round the clock
4.RTGS is different from NEFT
5.RTGS is a safe transaction system
Let us talk more about them in detail-
1.RTGS is a Wire Transfer-
RTGS is a wire transfer, which means the money is transferred electronically. Generally, people refer to wire transfers for transferring of funds outside India; however, there are two systems of interbank transfer making payments within the country-Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) – that are maintained by the Reserve Bank of India (RBI).In RTGS, funds are transferred instantly as settlement is done on a transaction to transaction basis. So the next question is, what is the difference between RTGS & NEFT if both are wire transfers. We would discuss them in detail below. Let us first understand how RTGS transactions take place-You can transfer funds through RTGS by offline and online methods. To transfer funds offline, you need to visit the Bank, and you can also transfer funds through net banking. Information Necessary to Make RTGS Fund Transfer
If you want to transfer money through RTGS either offline or online mode, you would require the following details of the recipients.
Beneficiary account number
Beneficiary account name
Beneficiary bank name and IFSC code
The amount of transfer
Cheque (For offline mode)
Modes Available to Perform RTGS
There are two modes to transfer funds through RTGS.
The first method for fund transfer through RTGS is using the internet facility provided by most banks. To make a fund transfer online through net banking, you need to add the beneficiary online by entering details about the bank account, including bank name, IFSC code etc. After successfully adding the recipients, you can now transfer funds to the beneficiary.
You can also visit the nearest bank branch and fill the RTGS form to fund transfer through RTGS. Finally, make the payment through cash or Cheque of the amount that you need to transfer.
How to make RTGS Funds Transfer Online?
To make RTGS funds transfer through online mode, you need to follow the below-mentioned steps:
- Firstly, log in net banking account of the Bank using your login conditionals by officially visiting the bank website.
- Now, add the beneficiary account details such as bank name, IMPS code, account name and number.
- Next, select the RTGS mode under the Funds Transfer tab and enter the amount of fund transfer.
- Finally, accept the terms and conditions as mentioned and submit the RTGS online form.
2.RTGS is meant for high-value transactions-
RTGS transfers are primarily for high-value transactions, and the minimum amount you can transfer via RTGS is ₹ 2 Lakh. However, there is no upper limit for transferring money through RTGS by visiting the bank branch. In case you do RTGS transfers through internet banking; you can send a maximum of ₹ 25 Lakh lakh per day per customer.
3.RTGS can be done around the clock-
The timings for RTGS transactions vary from Bank to Bank. As per the RBI guidelines, you can perform RTGS transactions 24*7 from 14th December 2020. Earlier, the RTGS facility was available from 7:00 am to 6:00 pm on all weekdays except, second & fourth Saturday of the week by visiting the bank branch. However, in fund transfer through internet banking, some banks already allowed you to do RTGS transactions 24*7.
4.RTGS is different from NEFT –
So till now, we have understood What is RTGS? RTGS is an electronic fund trasnfer between Banks where funds are transferred instantly on a real-time basis. So what is NEFT? NEFT stands for National Electronic Funds Transfers and, as the name suggests, is also an electronic transfer of funds from one Bank to another, but the similarity ends here. There are some basic differences among the two-RTGS is done on real-time basis whereas NEFT transactions are settled in batches based on the following timings:
- Settlements on weekdays at hourly intervals from 9:00 hrs to 19:00 hours.
- Settlements on Saturdays at hourly intervals from 9:00 hrs to 1:00 hrs.
Another major difference is transaction limit-
RTGS has a minimum limit of Rs. two lakhs, however there is no such restriction for NEFT. It can be done for amount as low as Rs.1
Both NEFT & RTGS are used for making the following transactions-
- Cash Management Transfer
- Interest payments
- Loan payments
- Securities transactions
- Supplier payments
- Tax payments
- Trade payments
- Trade Settlement payments
- Goods and Services Tax (GST) payment
5.RTGS is a safe transaction system
Since there are no physical movements of instruments, RTGS is by far a safe transaction system.
However , since the transaction is user induced, that is transaction is been done by the account holder himself, accountability of the correctness of information is on the account holder only. It is therefore important that we crosscheck all the information of the beneficiary-
- Beneficiary account no
- Beneficiary Bank details
- Beneficiary account status, it should not be dormant.
- Beneficiary account should be KYC verified.
In case the funds are transferred into wrong accounts, customers cannot demand the funds back.Though Banks try to reverse the funds on the basis of good faith & the consent letter of beneficiary account holder, customers cannot hold Bank liable for their loss.
Apart from the main features there are some more frequently asked questions I will be answering, so that you are absolutely clear about What is RTGS?
What are the charges for RTGS transactions?
With effect from July 01, 2019, the Reserve Bank has waived the processing charges for RTGS transactions. Banks may pass on the benefit to their customers.
A broad framework of charges has been mandated as under:
- a) Inward transactions – Free, no charge to be levied.
- b) Outward transactions – ₹ 2,00,000/- to 5,00,000/- : not exceeding ₹ 24.50/-; (exclusive of tax, if any)
Above ₹ 5,00,000/-: not exceeding ₹ 49.50/-. (exclusive of tax, if any)
Banks may decide to charge a lower rate or waive but cannot charge more than the rates prescribed by RBI.
How would one know the IFSC number of the receiving branch?
The IFSC number can be obtained by the remitter (customer) from his / her bank branch. Alternatively, it is available on the cheque leaf of the beneficiary. This code number / bank branch information can be communicated by the beneficiary to the remitting customer.
Alternatively you can check from the following RBI resource sheet-
Are all branches RTGS activated?
List of branches authorized to send & receive RTGS transactions can be checked under RBI resource-http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB0815.xlsx
Can we track RTGS transaction?
While the customers do not have the facility to track the transaction, the RBI has implemented the feature of positive confirmation in an RTGS transaction. Under this, the remitting bank would receive a message from RBI (through the beneficiary bank) that the money has been credited to the beneficiary bank / customer account. Based on this, the remitting bank should advise the remitting customer that money has been credited to the receiving bank’s beneficiary account.
Will the remitting customer get back the money if for any reason funds are not credited into beneficiary account?
Yes, mostly the funds are returned within an hour & Banks must credit it back to remitters account the same day.
Is the customer eligible for compensation in case of delay in crediting back of returned funds?
In any such scenario the originating customer is eligible to receive compensation at current repo rate plus 2%.