Definition
RTGS stands for Real Time Gross Settlement. This term refers to a funds transfer system that allows for the immediate transfer of money and/or securities. RTGS is the fastest possible money transfer system through the banking channel.
Key Takeaways
- RTGS stands for Real Time Gross Settlement, a fund transfer system that allows the transfer of money in real-time and on a ‘gross’ basis, meaning transactions are settled individually without grouping them with any other transaction.
- RTGS system is primarily meant for large value transactions. The minimum amount to be transferred through RTGS is set by each bank, generally, it is set at Rs. 2 lakhs or more.
- One of the main advantages of RTGS is that it eliminates credit risk as the payment is processed instantly, making it extremely secure. However, the service is typically available only during working hours and not 24/7.
Importance
RTGS, or Real Time Gross Settlement, is an important term in finance because it pertains to the continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank.
It’s significant primarily because it facilitates a system of immediate and final monetary transactions, thus reducing credit and settlement risk.
For businesses and individuals, this ensures quicker, safer, and more efficient transfer of high-value funds, creating increased financial stability and reliability, particularly in international transactions.
As it operates in real time, the transactions are not subject to any waiting period, making it an crucial element in the modern, time-sensitive financial landscape.
Explanation
The full form of RTGS is Real Time Gross Settlement. RTGS is a system of funds transfer from one bank to another on a real time basis, which signifies that the transaction is processed immediately without being grouped with other transactions.
This financial system is mainly designed for large transactions, with the minimum limit set by central banks of different countries; in some places, this limit could be as high as $1,000. Major businesses and corporations across the globe use this facility for their large dealings.
The purpose of RTGS is to facilitate quicker cash transfers for large values, thus enhancing efficiency and liquidity in the economy. It is often used for transactions like loan payments, property purchases, or any other big-value transactions.
RTGS guarantees immediate, secure and efficient transfers, thus reducing the risks associated with delayed payments and ensuring that financial obligations can be met promptly. Its instantaneous nature can help corporations manage their capital better, by allowing them to move money instantly in response to changing circumstances.
Examples of Full Form of RTGS
The full form of RTGS is Real Time Gross Settlement. This commonly used banking term is an immediate and continuous fund transferring system and hence the name. Here are three real-world examples:
Paying for a Car: If someone is buying a car and plans on making a cash payment, instead of carrying a large amount of money physically, they can use the RTGS system to transfer the amount directly to the seller’s bank account in real-time.
Tuition Fees: When parents are paying school or University tuition for their children, they might use an RTGS transfer to immediately send funds from their bank account to the institution’s bank account. This allows the funds to be available right away and confirms the enrollment process as complete.
Business Transactions: Many businesses use RTGS for transactions with their vendors or suppliers. For example, a manufacturing company may need to immediately pay a supplier for raw materials. By using RTGS, the funds transfer is immediate, allowing the supplier to confirm receipt of payment and ship out the materials without any delays.
FAQs on Full Form of RTGS
What is the full form of RTGS?
RTGS stands for Real Time Gross Settlement.
What is the significance of RTGS?
RTGS is a funds transfer system where money is transferred from one bank to another in real-time and on a gross basis. When you initiate an RTGS transaction, the amount is immediately transferred as the processing of instructions is done individually (gross basis).
What is the threshold limit for RTGS?
The minimum amount that can be remitted through RTGS is ₹ 2,00,000. There is no upper or maximum ceiling for RTGS transactions.
What is the time duration for RTGS?
RTGS is not a 24/7 system. The RBI RTGS transaction hours timings are stipulated by the Reserve Bank of India and are available on all days except for the 2nd and 4th Saturday of every month and on Sundays.
Is RTGS safe?
Yes, RTGS is a safe and secure system for funds transfer. It is managed by the Reserve Bank of India and is an efficient, reliable, and instant way to transfer funds across banks.
Related Entrepreneurship Terms
- Real Time: This term refers to the immediate processing of orders on a one-by-one basis, which is a significant aspect of RTGS.
- Gross Settlement: This term implies settling transactions on a one-to-one basis without clubbing with any other transaction, another crucial element of RTGS.
- Electronic Funds Transfer (EFT): Is a system of transferring money from one bank account directly to another without any paper money changing hands, similar to RTGS.
- Minimum/Maximum Transfer Limit: These terms refer to the limits set on the transaction amounts. In RTGS, usually, there is a minimum limit.
- Customer Identification Code (CIC): A unique identification code that each customer must provide when initiating an RTGS transaction.
Sources for More Information
- Investopedia: A comprehensive source of financial information that includes a vast amount of content on various financial terms and definitions including the full form of RTGS.
- The Balance: A site dedicated to personal finance and career advice. It provides detailed articles and resources on a variety of finance concepts including RTGS.
- Bank of India: Offers comprehensive information about different banking services and terms, including RTGS. It is a good source of firsthand knowledge from a banking perspective.
- Reserve Bank of India: As the central bank of India, this website provides authentic and detailed information about all banking and finance-related activities in the country, which includes details about RTGS.
