Real Time Gross Settlement (RTGS) is a system for electronic funds transfer between two banks on a “real-time” and on a “gross” basis. Settlement in “real time” means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed. “Gross settlement” means the transaction is settled on a one-to-one basis, without bundling or netting with any other transaction. “Settlement” means that once processed, payments are final and irrevocable.
RTGS System in India
The RTGS system in India is operated by the Reserve Bank of India (RBI) and is available to all banks licensed by the RBI. The RTGS system is operational for 24 hours on weekdays and 6 hours on Saturdays.
Features of RTGS
The key features of RTGS are as follows:
- Real-time settlement of transactions
- Gross settlement of transactions
- Final and irrevocable settlement
- High-value transactions
- Available to all banks licensed by the RBI
Benefits of RTGS
The RTGS system offers a number of benefits to banks, businesses, and individuals, including:
- Faster settlement of transactions
- Reduced risk of settlement failures
- Increased transparency in the settlement process
- Improved efficiency in the payment system
- Reduced costs for banks and businesses
- Convenience for individuals and businesses
MCQs and Answers
1. What is Real Time Gross Settlement (RTGS)?
(a) A system for electronic funds transfer between two banks on a “real-time” and on a “gross” basis. (b) A system for electronic funds transfer between two banks on a “deferred” and on a “net” basis. (c) A system for physical funds transfer between two banks on a “real-time” and on a “gross” basis. (d) None of the above
Answer: (a)
2. Which of the following is NOT a feature of RTGS?
(a) Real-time settlement of transactions (b) Gross settlement of transactions (c) Final and irrevocable settlement (d) Low-value transactions
Answer: (d)
3. Which of the following is NOT a benefit of RTGS?
(a) Faster settlement of transactions (b) Reduced risk of settlement failures (c) Increased transparency in the settlement process (d) Increased costs for banks and businesses
Answer: (d)
4. Who operates the RTGS system in India?
(a) The Reserve Bank of India (RBI) (b) The National Payments Corporation of India (NPCI) (c) The Securities and Exchange Board of India (SEBI) (d) None of the above
Answer: (a)
Conclusion
RTGS is a fast, efficient, and secure system for electronic funds transfer. It is used by banks, businesses, and individuals to transfer high-value payments in real time.