RTGS is one of the modes of money transfer into the bank account. Here we will read about all the information regarding RTGS.
What is the RTGS Full Form? RTGS Stands for?
The full form of RTGS is Real-Time Gross Settlement
It refers to the procedure which settles payments to the recipient. It is an instant way of fund transfer that does not lead to any delays for settlement to happen.
The services of RTGS are irreversible and final after the settlements are done. It is a fund transfer system where the transfer of securities or money takes place from a bank to another on a “real-time” and a “gross” basis.
What is RTGS
“Real-time” settlement refers to the payment transaction done without any waiting period and settling of the funds as soon as they are processed.
Whereas “Gross settlement” refers to as settling of the transaction on a one-to-one basis, without netting or bundling with other transactions. This mode is usually required for high-value inter-bank transactions.
These transactions typically require full and instant clearing and are usually settled by the central bank of the country.
It lowers down the overall risk as the settlements are done on an instant basis and not in batches. But the charges involved in RTGs lead to higher costs to the users.
RTGS is utilized by the central bank worldwide and assists in minimizing the risk involved in the transactions made by the customers.
Despite financial institutions and banks including high-level security to protect customer’s funds and information, the threats are increasing each day.
The funds should be above Rs. 2 lakhs to be transferred through real-time gross transfer.
While transferring money through RTGS, one requires this information for the process:
- The sum is required to be transferred
- Name of the payee or beneficiary
- Name of the payee’s/beneficiary’s bank
- IFSC code of the beneficiary/payee
- Account number of the beneficiary/payee
How to do RTGS
For ensuring a smooth transaction, one needs to understand the process of how to transfer money through RTGS. The steps are:
- Firstly there is a need of activating your internet banking facility, for which you will have to contact your bank for activation.
- Login to the bank’s online web portal with the password and ID which is provided to you.
- Visit your profile and choose the option of the beneficiary.
- From the inter-bank payment options, select RTGS.
- Choose the given option to add a beneficiary and provide the important details such as account number, IFSC code, name, and address of the beneficiary.
- Select the ‘accept Terms of Service’ button after ‘confirm’.
- Fill in the password that is sent to the registered mobile number to permit the beneficiary.
- Within few minutes, the beneficiary added will be activated which depends upon the security measures and bank. The transaction is done in minutes if the account of the beneficiary is done in minutes.
- For remitting the funds to the payee through NEFT/RTGS, choose the link ‘Inter-Bank Transfer’ given in the ‘Transfers/Payments tab.
- You will have to choose the Transaction type between the two: NEFT or RTGS.
- Then the lists of the beneficiary’s accounts that are added have appeared.
- Fill in the amount and from the given list select the beneficiary which is to be credited.
- Now select ‘Accept Terms of Service’ and then confirm.
RTGS Limit
The minimum transaction limit is Rs. 2 lakhs whereas, in the maximum transaction, there is no upper ceiling in the RTGS.
Some of the banks have a limit of Rs 10 lakhs that can be transferred per day through net banking.
RTGS Timings
The availability of the system of the real-time gross settlement (RTGS) is 24*7. It is also available on public holidays and Sundays, with the help of Net Banking.
RTGS Service Charges
The charges for the service in RTGS is Rs. 5 including the GST is the amount is from Rs. 2 lakh up to Rs. 5 lakh.
if the amount is above Rs. 5 lakhs, the service charges are Rs. 10 including GST.
Also note that the apex bank of India i.e. Reserve Bank of India has eliminated the charges for payments via RTGS and NEFT, asking banks to proceed on the benefits to its users.
It further means that the payments through RTGS and NEFT are either reduced or free.
Difference between RTGS and IMPS
- Minimum transfer value
The minimum transfer value of RTGS is Rs. 2 lakhs whereas in IMPS the value is Rs. 1.
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Maximum transfer value
In RTGS, the maximum transfer value has no limit. On the other hand, in IMPS the maximum transfer value is Rs. 2 lakhs.
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Type of settlement
In RTGS, transactions are done on an individual basis i.e. one-on-one settlement but at bank working hours whereas, in IMPS, transactions are done at any time and also on an individual basis.
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Maintained by
RTGS is maintained by the Reserve Bank of India (RBI) and IMPS is managed by the National Payments Corporation of India (NPCI).
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Transaction limit
The transaction limit in RTGS has no maximum limit subject to bank and on the other hand in IMPS there is no minimum limit.
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Service availability
The availability of the service in terms of RTGS depends on the bank whereas in IMPS the service availability is 24*7.
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Mode
The mode used in RTGS is online and offline both and on the other hand in IMPS, it is online.
Difference between RTGS and NEFT
Although RTGS and NEFT both are special services of Inter Bank transfer and widely used by customers to transfer money electronically. But they have some differences in their functioning. Some of the differences between RTGS and NEFT are mentioned below-:
- The basic difference between RTGS and NEFT is that RTGS is on a gross settlement basis while NEFT is based on net settlement.
- You can do large amounts of transactions from RTGS. The funds should be above 2 lakh rupees to use this system, While In the case of NEFT you can only do a small amount of transactions i.e you can only transfer an amount that is less than Rs 2 lakh.
- If we compare both on the criteria of settlement RTGS is fast as compared to NEFT because NEFT is done in batches while RTGS is done in real-time.
- In NEFT the credit happens only during the working hours of the bank. This means the beneficiary can’t receive the payment on the bank and public holidays While in the case of RTGS the credit can occur in real-time between banks.
- The maximum charges of NEFT as per RBI guidelines are:
If the amount is up to Rs 10,000, the charges are Rs. 2.5 and if the amount is from Rs 10,001 to 1 lakh, the charges are Rs. 5.
Whereas the charges are Rs. 15 and Rs. 25 if the amount is from Rs. 1 to 2 lakhs and above Rs. 2 lakhs respectively.
And the maximum charges of RTGS as per RBI is:
The charges are Rs. 25-30 if the amount is up to 2 to 5 lakhs.
Whereas, if the amount is above 5 lacs, the charges are Rs. 50-55.
(Fewer charges for the first half of the day)
Which is better for financial transactions RTGS or NEFT?
Both RTGS and NEFT modes of payment are widely used by customers. Both RTGS and NEFT are good in their way.
Among them which is best depends upon the user. If you want to transfer a large amount of money in real-time then RTGS is more beneficial.
But if you’re not that financially active and do a small number of transactions that are less than Rs 200,000 then NEFT is best for you. Generally, RTGS payments are used for transactions that are on an urgent basis.
So if there’s no urgency you can use NEFT.
Advantages of RTGS
- RTGS is the fastest and the safest mode of interbank transfer.
- RTGS is a paperless transfer of funds.
- It is less time-consuming and is available 24*7, anywhere and anytime. Therefore there is no requirement of visiting the banks for depositing the money.
- The service is available all days including Sundays and holidays.
- The mode of service of RTGS is either online through internet banking or mobile phone and offline through the branch of the bank both.
- Here every transaction is done instantly so it does not involve any settlement risk. It is considered the most reliable method of fund transfer. The transactions do not include any long processing periods or any delays.
Disadvantages of RTGS
- In RTGS, there is no facility to track any transaction done by the customers. Only the implementation of the confirmation is done by the central bank, in which the message is received by the remitting bank of fund transfer to the beneficiary bank, from the Reserve Bank of India.
- The minimum amount is Rs. 2 lakhs that can be transferred through RTGS but there is no limit for the maximum amount.
- Real-Time Gross Settlement is a system that has risk as it does not have enough money.