Final Project

RTGS - Merits & Demerits to the Retail Banker

Points
Content’s of RTGS system       

1 Background of RTGS
2 Definition of RTGS system
3 Advantage and disadvantage of RTGS
4 RTGS different from NEFT
5 Process of RTGS system
6 IFSC &Remitting customer
7 Impact of RTGS 
8 Procedure for a customer and charges in RTGS

Background of RTGS ? In June 1998, the Reserve Bank of Australia (RBA)implemented Real Time Gross Settlement (R
4 Definition of RTGS ? RTGS system is a funds transfer mechanism where transfer of money takes place from one ban
5 Advantage & disadvantage of RTGS ? Real-time Payment Settlement: Payments settled in real time on a transaction
6 Cont….. ? The only disadvantage of RTGS systems is the fact that it requires more liquidity than net settlement syst
7 RTGS different from NEFT NEFT is also an electronic funds transfer system that operates on deferred net settlem
8 Process of RTGS RTGS transaction diagram
9 IFSC The Indian Financial System Code (also known as IFSC) is a 11 digit code for identifying the bank and branch w
10 Procedure for a customer and charges in RTGS ? customer wants to use the RTGS, he will have to go to an RTGS-e
11 Remitting customer The remitting customer has to furnish the following information to a bank for effecting a RTG
12 Impact of RTGS ? It is expected that some traditional products like cash management for corporate customers an
13 THANK YOU
 d Real Time Gross Settlement (RTGS) ? purpose of achieving finality of payments and enhancing stability in the financial and securities sett
money takes place from one bank to another on a “real time” and on “gross” basis. ? This is the fastest possible money transfer system thr
ttled in real time on a transaction-by-transaction basis, as soon as they are accepted by the system. ? No Credit Risk :- There is no credit and
iquidity than net settlement systems, as liquidity has to be available for each individual payment. ? several way to mitigate this liquidity pro
perates on deferred net settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place at a particular p

entifying the bank and branch which an account is held. The IFSC code is used both by the RTGS and NEFT finance transfer systems.RTGS N
, he will have to go to an RTGS-enabled bank branch where he maintains his account and give an online instructions for the funds to be cre
tion to a bank for effecting a RTGS remittance: ? Amount to be remitted ? Remitting customer’s account number which is to be debited ? Na
ment for corporate customers and traditional money transfer systems among branches. ? lose their significance with the RTGS in place and
n the financial and securities settlements can be completed have changed. ? In india this system was launched on March 26, 2004 (on pilot
ssible money transfer system through the banking channel. ? Settlement in “real time” means payment transaction is not subjected to any
edit Risk :- There is no credit and settlement risk involved in RTGS system for receiving participant as each payment transaction is settled in
way to mitigate this liquidity problem. The system could have rules for how fast payments should be made in the system. ? RTGS system an
ent takes place at a particular point of time. All transactions are held up till that time. NEFT Settlement take place 6 times a day during th

finance transfer systems.RTGS NEFT The code consists of 11 characters - first 4 characters (4!A) represent the entity; fifth position has been
tructions for the funds to be credited to the beneficiary’s account instead of using draft and cheque ? Presently, about 3000 branches at 27
mber which is to be debited ? Name of the beneficiary bank ? Name of the beneficiary customer ? Account number of the beneficiary cust
ance with the RTGS in place and banks may have to design other innovating products for their customers. While a demand draft takes abou
hed on March 26, 2004 (on pilot basis by involving 4 banks) by RBI for large value transactions for banks and their clients. ? RBI expects 120
nsaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. ? “Gross settlement” means the
payment transaction is settled instantly. ? Predictability of Cash Flows:- RTGS facilitates predictability of cash flows as customers know whe
in the system. ? RTGS system and the participants can develop queuing features, and algorithms that calculate the order of which paymen
ake place 6 times a day during the week days (9.00 AM,11.00AM, 12.00 noon, 1.00PM, 3.00PM and 5.00 PM) and 3 times during Saturda

the entity; fifth position has been defaulted with a '0' (Zero) for future use; and the last 6 characters (6!X) denote the branch identity. IFSC i
ently, about 3000 branches at 275 locations in India meet this criterion. RBI expects about 20000-25000 cheques which involve high value
t number of the beneficiary customer ? Sender to receiver information, if any ? The IFSC Number of the receiving branch
While a demand draft takes about 7 days, it takes about 1-2 days under EFT which is available in 134 cities.
d their clients. ? RBI expects 120 scheduled commercial banks and primary dealers to become part of the real time gross settlement system
? “Gross settlement” means the transaction is settled on one to one basis without bunching with any other transaction.
sh flows as customers know when their accounts will be debited or credited. ? Benefits to Economy : The instant finality of payments ensur
ulate the order of which payments should be made in order to get a smooth flow of payments
PM) and 3 times during Saturdays (9.00AM, 11.00 AM and 12.00 noon), Any transaction initiated after a designated settlement time wo

enote the branch identity. IFSC is being identified by the RBI as the code to be used for various payment system projects within the countr
heques which involve high value customer transactions to migrate to RTGS. a) Inward transactions – Free, no charge to be levied b) Outward
ceiving branch
 eal time gross settlement system by June 2004.
er transaction.
nstant finality of payments ensures fast, secure and irrevocable settlement of major business and financial market transactions

designated settlement time would have to wait till the next designated settlement time. Contrary to this, in RTGS, transactions are proce

ystem projects within the country, and it would, in due course, cover all networked branches in the country. In due course, when all bank br
o charge to be levied b) Outward transactions – ` 2 lakh to `. 5 lakh - not exceeding ` 25 per transaction. Above ` 5 lakh – not exceeding ` 50
market transactions

, in RTGS, transactions are processed continuously throughout the RTGS business hours. RTGS business hours: Monday to Friday : 9.00 A

. In due course, when all bank branches participate in electronic payment systems, they would need to have a single identifiable unique cod
ove ` 5 lakh – not exceeding ` 50 per transaction
ours: Monday to Friday : 9.00 AM to 4.30 PM Saturday : 9.00 AM to 12..30 PM

e a single identifiable unique code and IFSC would serve the purpose effectivelyelectronic payment systems