In this article, we’re answering “what is RTG in banking?”
First of all, RTGS refers to Real-Time Gross Settlement, which is a form of immediate (or real-time) fund transfers between financial institutions.
In this article, we’re going to take a closer look at RTGS, the benefits, the parties involved, and answer a number of common questions we receive on the topic.
This article is part of our free series on banking answering questions like “how to open accounts” and “can I keep my bank account if I move abroad” – click here to access the rest of the series now.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Is RTGS in Banking?
- Why Is RTGS in Banking?
- What Are the Benefits of Real Time Gross Settlement?
- Frequently Asked Questions
- Ready to Explore Your Options?
What Is RTGS in Banking?
RTGS in banking refers to Real-Time Gross Settlement, which is a form of instantaneous fund transfer between banks that is facilitated by the central bank of a country. RTGS is intended to support high-value transactions that require immediate clearing. In doing so, it reduces the risk of sending (and receiving) high-value transactions while also reducing the administrative burden of clearing many transactions, as they are sent in bulk through an RTGS transfer from one bank to another.
Depending on the country, the specific mechanism for sending and receiving RTGS transfers. For example, in India, the Reserve Bank of India facilitates RTGS transfers between banks while in the United States RTGS is managed by the Federal Reserve. Likewise, the Bank of England is responsible for maintaining the RTGS payment network in the United Kingdom.
Why Is RTGS Used in Banks?
RTGS is used by banks to facilitate large bulk transfers with other financial institutions. In fact, this process is facilitated by the central bank and the centrally controlled payment network in most countries, ranging from RBI to the Federal Reserve. In addition to providing instantaneous settlement of bulk transactions, RTGS also reduces transaction risk between financial institutions.
Money Transactions to a Bank Account
In India, RTGS is a form of money transfer that clients can use to send high-value transactions. In fact, when visiting a branch, there is typically no upper limit on the value of the transaction sent. The minimum value of an RTGS-enabled transaction is Rs 2 Lakh, while transactions below this level will be processed between banks using National Electronic Funds Transfers (NEFT) instead.
What Are the Benefits of Real-Time Gross Settlement (RTGS)?
The benefits of Real-Time Gross Settlement (RTGS) transfers include several key deliverables, including instantaneous settlement, reduced risk for financial institutions, and reduced administrative burden due to the bulk processing of transactions. With this in mind, here is a look at most of the benefits referenced in relation to RTGS:
Benefits of Using RTGS
- Instant settlement
- Reduced settlement risk
- Reduced counterparty risk
- Central bank-enabled service
- Bulk processing of transactions
- No physical transfer of funds required
- Reversal of RTGS transfers is not possible
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Frequently Asked Questions
Below are two of the most common questions we receive from individuals in India looking to understand what RTGS is in banking. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
What Is the Maximum Amount for Real-Time Gross Settlement?
The maximum amount for Real-Time Gross Settlement enabled transactions in India will depend on the bank. That said, in most cases, when a customer visits the branch in person there is no maximum threshold and any transaction amount is possible. When completing RTGS-eligible transfers online, the maximum value allowed typically ranges between Rs 25 Lakh and RS 50 Lakh. So, when asking what is RTGS in banking you should also consider whether the transfer limits match your needs.
What Is the Difference Between RTGS and NEFT?
The main difference between RTGS and NEFT in India is that RTFS refers to Real-Time Gross Settlement transfers while NEFT refers to National Electronic Funds Transfers. More specifically, RTGS is a system for instantaneous high-value transactions while NEFT can be sent for any amount. Additionally, while RTGS is instantaneous, NEFT can take several hours to process.
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