HISTORY Of RTGS

In June 1998, the Reserve Bank of Australia (RBA)implemented

Real Time Gross Settlement (RTGS)
With the purpose of achieving easy payments and enhancing
stability in the financial and securities settlements can be
completed have changed.

In India this system was launched 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 scheduled commercial banks and primary
dealers to become part of the real time gross settlement system
by June 2004.

Definition of RTGS
RTGS system is a funds transfer mechanism where
transfer of money takes place from one bank to
another on a real time and on gross basis.
This is the fastest possible money transfer system
through the banking channel.
Settlement in real time means payment transaction
is not subjected to any waiting period. The
transactions are settled as soon as they are
processed.
Gross settlement means the transaction is settled
on one to one basis without bunching with any other
transaction.
Advantage & disadvantage of RTGS
Real-time Payment Settlement: Payments settled 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 settlement risk
involved in RTGS systems for receiving participant as
each payment transaction is settled instantly.
Predictability of Cash Flows:- RTGS facilitates
predictability of cash flows as customers know when
their accounts will be debited or credited.
Benefits to Economy : The instant finality of payments
ensures fast, secure and irrevocable settlement of
major business and financial market transactions

Cont..
The only disadvantage of RTGS systems is the fact
that it requires more liquidity than net settlement
systems, as liquidity has to be available for each
individual payment.
several way to mitigate this liquidity problem. The
system could have rules for how fast payments should
be made in the system.
RTGS system and the participants can develop
queuing features, and algorithms that calculate the
order of which payments should be made in order to
get a smooth flow of payments
Timing for RTGSs
The RTGS service window for customer's transactions is
available to banks from 9.00 hours to 16.30 hours on week
days and from 9.00 hours to 14:00 hours on Saturdays for
settlement at the RBI end. However, the timings that the
banks follow may vary depending on the customer timings
of the bank branches.