RTGS 24×7, 365 days is a game changer for markets

Mumbai: The central bank move to allow large-value fund transfers 24×7 through the Real Time Gross Settlement (RTGS) system has the potential to eliminate delays in the movement of money, helping quicken the pace of trade in India. Funds above Rs 2 lakh can now be transferred through the RTGS system anytime of the day or night starting December 1, 2020, making India one of the select countries globally to have this facility. The Reserve Bank of India (RBI) move that was announced as part of the monetary policy review in October follows a similar action to make the National Electronic Funds Transfer (NEFT) system available 24×7 since December 2019. Unlike RTGS, NEFT does not have a minimum transaction limit and is used mostly by retail customers to transfer funds. Central bank governor Shaktikanta Das had said he expects the move to foster innovation in the large-value payments ecosystem, helping companies transact more easily. Bankers said RTGS will now be increasingly used by businesses to settle large amounts even on weekends. 80335452“So far, RTGS was only available on banking days. So, if a supplier sent goods on a Saturday evening, he might have to wait until Monday for payments,” said R Venkattesh, head of operations, technology and HR at DCB Bank. “Now, he can expect to receive the money the same day. Also, since RTGS was available only during a particular time of the day, there used to be a rush, particularly in the evenings to send money. That pressure on banks will ease.” The RTGS system handled around six lakh transactions daily for a value of around Rs 4 lakh crore across 237 participant banks with the average ticket size of Rs 57.96 lakh as of November 2020, RBI data showed. Before it was made 24×7, RTGS was available from 7.00 a.m. to 6.00 p.m. on all working days. However, some banks had an earlier cut-off to ensure smooth settlements.Bankers say that since this route allows instant large value transactions that demand careful handling, banks will offer it only selectively to customers based on their needs. “Even for NEFT, banks have set limits on how much can be sent by one account, though there is no upper limit. Since these are high-value transactions, banks may want to limit this to clients who ask for it or those who genuinely need it,” said a banker. RTGS is used for transactions between businesses but there’s some reluctance among customers to use it for high-value transactions like real estate due to its instant settlement. The convenience of 24×7 usage could enhance commercial use of RTGS. However, retail customers have many modes for payments, including Immediate Payment Service (IMPS) that is a real-time payment service available even on holidays.
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