Real Time Gross Settlement

Real time gross settlement systems (RTGS) are a funds transfer mechanism where transfer of money takes place from one bank to another on a "real time" and on "gross" basis. 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. Once processed, payments are final and irrevocable.

Details

Below is a listing of countries and their RTGS systems:

* Australia - [RITS]
* Bulgaria - RINGS (Real-time INterbank Gross-settlement System)
* Canada - LVTS (Large Value Transfer System) (This is actually an RTGS "Equivalent" system. Final settlement happens in the evening.)
* Czech Republic - CERTIS (Czech Express Real Time Interbank Gross Settlement System)
* India - RTGS and NEFT
* Iran - SATNA (Real-Time Gross Settlement System)
* Israel - Zahav (Credit and Transfers in Real Time) [ [http://israbank.gov.il/zahav/pc_e.htm The Zahav System] Bank of Israel website]
* Kuwait - KASSIP (Kuwait's Automated Settlement System for Inter-Participant Payments)
* Macedonia - MIPS (Macedonian Interbank Payment System) [ [http://www.nbrm.gov.mk] National Bank of Macedonia website]
* Poland - SORB [http://www.nbp.pl/publikacje/bank_i_kredyt/2003_04/summaries.pdf]
* Turkey - EFT (Electronic Fund Transfer)
* Hong Kong - Clearing House Automated Transfer System‎ (CHATS)
* Singapore - MEPS+ (MAS Electronic Payment System Plus)
* Switzerland - SIC (Swiss Interbank Clearing) [http://www.sic.ch/en/tkicch_home.htm]
* United States - Fedwire and CHIPS
* UK - CHAPS (Clearing House Automated Payment System)

RTGS systems covering multiple countries:

* TARGET resp. TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) in 26 countries of the European Union

This "electronic" payment system is normally maintained or controlled by the Central Bank of a country. There is no physical exchange of money; the Central Bank makes adjustments in the electronic accounts of Bank A and Bank B, reducing the amount in Bank A's account by $1000 and increasing the amount of Bank B's account by the same.

The RTGS system is suited for low-volume, high-value transactions. It lowers settlement risk, besides giving an accurate picture of an institution's account at any point of time.

Such systems are an alternative to systems of settling transactions at the end of the day, also known as the "net settlement" system such as BACS. In the net settlement system, all the inter-institution transactions during the day are accumulated. At the end of the day, the accounts of the institutions are adjusted. Extending the example above, say another person deposits a check drawn on Bank B in Bank A for $500. At the end of the day, Bank A will have to "electronically" pay Bank B only $500 ($1000 - $500).

The implementation of RTGS systems by Central Banks throughout the world is driven by the goal to minimize risk in high-value electronic payment settlement systems.

In an RTGS system, transactions are settled across accounts held at a Central Bank on a continuous gross basis. Settlement is immediate, final and irrevocable. Credit risks due to settlement lags are eliminated.

RTGS does not require Core Banking to be implemented across participating banks. Any RTGS would employ two sets of queues: one for testing funds availability, and the other for processing debit/credit requests received from the Integrated Accounting System. All transactions would be queued and submitted for funds availability testing on a FIFO+Priority basis.

References