Real Time Gross Settlement (RTGS) system

sunandaC

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Real Time Gross Settlement (RTGS) system:

• RTGS is a payment system in which both processing and final settlement of funds transfer instructions take place continuously in real time.

• It is a gross settlement system where transfers are settled individually, that is, without netting debits against credits.

As it is a real-time settlement system, the system effects final settlement continuously rather than periodically at pre-specified times provided that a sending bank has sufficient covering balances or credit.


RTGS system can be characterized as a funds transfer system that is able to provide continuous intra-day finality for individual transfers. In this system payment instructions between banks are processed and settled individually and continuously throughout the day. This is in contrast to net settlements where payment instructions are processed throughout the day but inter-bank settlement takes place only afterwards typically at the end of the day.


In RTGS system, payee banks and their customers receive funds with certainty, or so-called finality, during the day, enabling them to use the funds immediately without exposing themselves to risk.
 
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