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What is RTGS payment and how does it work?
What is RTGS payment and how does it work?
Real-Time Gross Settlement (RTGS) is a payment system that enables the transfer of funds from one bank to another in real-time and on a gross settlement basis. Here’s how it works:
- Initiation: The sender initiates the transaction by providing the details of the recipient’s bank account, the amount to be transferred, and any other required information.
- Authorization: The sender’s bank verifies the transaction details and authorizes the transfer of funds.
- Transfer: The funds are transferred from the sender’s bank account to the recipient’s bank account in real-time and on a one-to-one basis.
- Settlement: Once the transfer is complete, the transaction is settled, and the funds are irrevocably transferred to the recipient’s account.
RTGS is generally used for high-value transactions and is operated and organized by a country’s central bank. It is an efficient and secure method of transferring funds, as transactions are settled in real-time, and there is no waiting period. RTGS also lessens the possibility that one or more parties will fail to deliver on the terms of a contract at the agreed time.