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The need for secure and efficient transaction methods has become paramount in today’s banking era. Thus, the Reserve Bank of India (RBI) offers a Real-Time Gross Settlement (RTGS) system for transferring high-value funds. RTGS is one of the most popular payment settlement systems in the country.
This article explores the meaning of RTGS, its significance, how it works, its applications and more.
RTGS full form stands for Real-Time Gross Settlement, a system that facilitates fund transfers between banks quickly without delays. Real-Time Gross Settlement is a banking system that transfers funds directly from one bank account to another.
As the name suggests, the bank processes and settles on a transaction-by-transaction basis (without netting) in real-time and on a gross basis. The banks handle each transaction individually, without it being a group or batch with other transactions.
Unlike other payment systems, such as NEFT, cheque transfers, or Automated Clearing Houses (ACH), which settle transactions in batches at a particular time in the day, RTGS settles transactions continuously throughout the day.
RTGS enables immediate and secure fund transfers between banks. Here’s how it works:
Suppose you initiate an RTGS transaction of Rs. 3,00,000 lakh at 11:00 a.m. The transfer will be processed immediately, and the beneficiary will receive the funds within minutes (maybe by 11:30 a.m.).
Following are the different ways to do an RTGS transfer:
The following details are essential to initiate an RTGS transaction:
To make an RTGS transfer online, you need to first add a beneficiary online and then proceed to make the transfer. However, if you have already added a beneficiary before, you can proceed directly to initiate the RTGS transfer.
Here are the steps to add a beneficiary:
Step 1: Log into your bank’s net banking portal using your credentials.
Step 2: Go to the ‘Funds Transfer’ section.
Step 3: Click on the ‘Add Beneficiary’ option.
Step 4: Provide beneficiary account details such as account number, IFSC, bank name, and branch name.
Step 5: Click the ‘Add’ button and then confirm your action.
Step 6: You may have to authenticate the addition by typing in your credentials.
Step 7: A confirmation message will be sent to you once the beneficiary is added.
Upon adding a beneficiary, you can start transferring funds through RTGS by following these steps:
Step 1: Log into your bank’s net banking portal using your credentials.
Step 2: Go to the ‘Funds Transfer’ tab on your bank’s internet banking page.
Step 3: Select the beneficiary’s account number and choose ‘RTGS’ as a transfer mode.
Step 4: Enter the amount to be transferred.
Step 5: Select the checkbox that says you agree to the terms and conditions.
Step 6: Review the details and click the ‘Confirm’ button to complete the process.
Step 1: Go to the bank branch where you hold an account and request an RTGS transfer.
Step 2: Complete the RTGS form provided by the bank with the following details- beneficiary's name, account number, bank details, transfer amount and your account details.
Step 3: Submit the completed form along with your identification or any required documents.
Step 4: If applicable, pay the RTGS transaction fee as per the bank’s charges.
Step 5: The bank will process the transaction and provide a confirmation slip or message containing the transaction reference number and status.
The RBI has removed or waived the processing charges for RTGS transactions from 1 July 2019.
To rationalise the service charges levied by banks for funds transfer through the RTGS system, the RBI has mandated the following broad framework of charges:
Transaction Amount | Maximum Transaction Charges |
Rs. 2,00,000 to Rs. 5,00,000 | Not exceeding Rs. 25, excluding GST |
Above Rs. 5,00,000 | Not exceeding Rs. 50, excluding GST |
However, the service charges for RTGS transfers may vary from bank to bank. Usually, most banks do not charge any fees for RTGS transfers online.
From December 2020 onwards, the RBI has provided RTGS service 24/7 for 365 days a year, including public holidays, bank holidays, and weekends.
As per the RBI, the minimum RTGS amount limit is Rs. 2,00,000 and there is no maximum upper limit for RTGS.
The advantages of using RTGS (Real-Time Gross Settlement) are numerous:
Although RTGS has many advantages, it has some disadvantages. Here are some common challenges with RTGS transactions:
RTGS fund transfers are settled real-time while NEFT transfers are settled in half-hourly batches. NEFT can be used to transfer small amounts since the minimum limit is Rs.1 while the minimum limit for RTGS is Rs. 2,00,000.
Both RTGS and IMPS fund transfers are settled real-time but IMPS can only be initiated online and not by visiting the bank. IMPS allows the transfer of small amounts since the minimum limit is Rs.1 while the minimum limit for RTGS is Rs. 2,00,000. However, the maximum amount that can be transferred using IMPS is Rs. 2,00,000 while there is no maximum limit for RTGS.
Each bank has its own RTGS form. Thus, you can get the RTGS form of your bank by visiting it. Here are some of the RTGS forms of different banks:
Real-Time Gross Settlement (RTGS) provides safe transactions, as it is backed by the RBI. It ensures immediate and real-time settlements. RTGS is the best payment option for high-value transactions since there is no upper limit on the amount that can be transferred. RTGS is now available 24x7, with a nominal transaction charge, making it easy to make large transfers.
Related Article:
1. Differences between NEFT, RTGS and IMPS