The acronym “RTGS” stands for Real Time Gross Settlement. 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. Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable.
But RTGS facility can only be accessed by banks that have membership of centralized payment system. To extend the facility to non-member banks RBI has decided to take the sub-membership route to enable all licensed banks to participate in the RTGS system.
This shall be an option to banks to participate in RTGS, who have the capability but either do not meet the criteria or due to cost consideration are not able to be a direct member of the centralized payment system.
Currently, RTGS system, under which funds worth Rs 2 lakh or more can be transferred instantaneously, is handling an average of three lakh transactions per day, up from only 4,000 transactions when it was launched in 2004.
The scope of the proposed solution is to develop a framework that shall not only facilitate the banks to integrate with the Structured Finance Messaging System developed by IDBRT for the purpose of RTGS settlements but shall also empower the member banks of the centralized payment system to act as sponsors to enable non-member banks to get RTGS facility thorough the sub-membership route.