April 26, 2023

What is RTGS - Meaning , Full Form, Timings and Transfer Limit

Digitalizing banking transactions has led to various new ways to transfer money. Real-Time Gross Settlement, or RTGS, is one method of money transfer. It is a technology that enables immediate money transfers between bank accounts.

Do you wish to learn more? Check out this guide on real-time payment methods. Let's first look into what real-time gross settlement is.

What is RTGS and how does it work?

RTGS full form in banking is Real Time Gross Settlement. Real-time in this context refers to how quickly funds are sent. The transfer happens so fast that it appears to be happening in real time. "Gross settlement" refers to handling and settling transactions individually instead of grouping or bundling several transactions. It is the foundation of a real-time gross settlement system.

The Reserve Bank of India (RBI) first established this fund transfer option in 2004. Due to its capacity to transfer money on the same day, RTGS has more than 110,000 bank branches today, making it one of the most widely used money transfer methods.

RTGS is one of India's fastest interbank options for money transfers through banking channels. In an RTGS transaction, the beneficiary bank must credit the recipient's account with the money within 30 minutes of receiving the money transfer message.

Features of RTGS

RTGS allows consumers to initiate money transfers from any location utilizing online banking services.
The customer may also transfer money using an offline method. However, this requires them to deposit the money in a bank that offers RTGS services and fill out a document requesting cash transfer via the RTGS system.
RTGS payments are typically instantly cleared and are organized primarily with the nation's central bank. The Reserve Bank of India (RBI) manages the fund transfer method, which is exclusively used for transfers within the country.
The transferred amount is irrevocable after the transactions have been made.
Additionally, the RTGS method must be used to transmit a sum that is at least ₹2 Lakh. The RTGS system does not allow transfers of less than this amount.
RTGS is the best payment option for high-value transactions. Therefore, the quantity of money transmitted through this mechanism has no upper RTGS limit or upper restriction, which means that the RTGS system can transfer any sum over two lakh rupees.

What distinguishes RTGS from NEFT (National Electronic Funds Transfer)?

Since NEFT transactions are processed in batches, they are frequently delayed. Contrarily, in RTGS, transactions are continually handled on a transaction-by-transaction basis during the RTGS business hours.

Moreover, there is no minimum transfer amount in NEFT; hence any amount up to ₹1 can be sent using this mechanism. However, 2 lakh rupees is the entry threshold for RTGS transactions. In light of this, NEFT is a more effective payment method for smaller amounts.

What distinguishes RTGS from BACS (Bankers' Automated Clearing Services)

As mentioned above, RTGS transactions are handled instantly, so they are cleared as soon as they are initiated. On the other hand, BACS payments are managed in batches throughout the night. Therefore, RTGS transactions are more costly since banks must maintain their systems for a more extended period of time.

Another difference between RTGS and BACS is that RTGS payments are irrevocable, in contrast to BACS payments, which can be revoked in the event of an error. It implies that RTGS is frequently used for transfers that must be made on time, like salaries or taxes.

Charges on RTGS transactions

Transfers done through RTGS are not subject to any processing charges from the RBI. However, it does impose a service charge for outgoing transactions that the sender is required to pay. The beneficiary is not required to make any payments on inward transactions.

The RTGS charges on outward transactions are as follows:

For transfers between ₹2 Lakh – ₹5 Lakh: ₹24.50+taxes
For transfers of ₹5 Lakh and above: 49.50+taxes

Benefits of RTGS

Understanding the benefits of each transaction mechanism is crucial before implementing it. It helps you fully understand what to anticipate from the transaction and how to ensure its security (if required).

Here are a few benefits of using RTGS:

It is a secure method of transferring money: Real-time money transfers' primary benefit is reducing the risk involved in high-value transactions between banks and financial organizations. Despite the outstanding levels of protection that financial institutions provide, cyber threats are ever-evolving. Thus it is beneficial to have the most secure money transfer system.
Speedy transaction:

RTGS significantly reduces the time needed to transfer high-value funds because of its immediate clearance and simple procedure. All you need is a bank account with RTGS support and the beneficiary's information for the transfer.

Transfer money anywhere in INDIA: There are no restrictions on where you can send money in India. Customers can use this service to transfer money to other bank accounts anywhere in the country by accessing internet banking on their laptops and mobile devices.
Money can be sent anytime, any day: There are no RTGS timings. RTGS services are available around the clock. So with RTGS, you can transfer money even on weekends and bank holidays.
There are no costs or fees associated with the transfer of funds. The RBI has eliminated transaction costs for all RTGS transactions, irrespective of your bank, in an effort to encourage digital transactions.
Transactions can be scheduled: It's interesting to note that users can arrange their RTGS transaction days in advance. This makes it relatively easy for businesses and employers to send significant sums of money to their valuable employees.

Details required to complete an RTGS transfer

Remitting account details.
IFSC code of the recipient bank.
Beneficiary's name.
Beneficiary's bank's name and branch.
Account number of the beneficiary.
Amount of money to be transferred.
Notes or remarks, if any.

Indian banks that provide RTGS services

Numerous banks in India provide the RTGS service. The RTGS transaction procedure and the associated charges may differ from one bank to another. So it is recommended to confirm this before using the service.

The following is a list of some of the leading banks that provide the RTGS facility:

SBI (State Bank of India)
Axis Bank
ICICI Bank
HDFC Bank
RBL Bank

Conclusion

When transferring a sizable sum of money, RTGS is the most dependable and popular option. Now that you know what RTGS is, you can use it for high-value transactions.

You must make sure both the sending and receiving banks are RTGS-enabled bank branches to complete an RTGS transfer effectively. Additionally, remember that RTGS transfers occur in the RBI's books and that the payments are final and irrevocable.