Real-Time Gross Settlement (RTGS) is an electronic form of funds transfer where the transmission takes place on a real-time basis. It is a continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank. RTGS systems are typically run by the central bank of a country and are generally used for large-value interbank funds transfers that require immediate and complete clearing. Once transactions are settled, they cannot be reversed. RTGS does not require an actual physical exchange of funds. Instead, a central bank will often adjust the accounts of the sending and receiving bank in electronic form.
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 a gross basis. The customer initiating the funds transfer through RTGS has to have the Indian Financial System Code (IFSC) of the beneficiarys bank, along with the name of the beneficiary, account number, and name of the bank.
Benefits of RTGS include that it is a safe and secure system for funds transfer, RTGS transactions have no amount cap set by RBI, the system is available on all days on a 24x7x365 basis, there is real-time transfer of funds to the beneficiary account, and the remitter need not use a physical cheque or a demand draft. For a funds transfer to go through RTGS, both the sending bank branch and the receiving bank branch need to be RTGS enabled.
