Real Time Gross Settlement: What RTGS Is, How It Works & When to Use It

Every financial system has a “fast lane.” The U.S. has Fedwire, Europe runs on T2 (formerly TARGET2), and the U.K. relies on CHAPS. 

In India, that’s Real-Time Gross Settlement (RTGS). 

You could call RTGS efficient, secure, or instant, but the numbers say it best. In FY25 alone, RTGS grew 12% in usage and almost 18% in value. Why? When it comes to moving high-value payments, nothing beats real-time precision.

In this blog, we’ll answer what is RTGS transfer, how it works, why it matters, and what sets it apart from other payment methods. 

RTGS is an interbank payment system that facilitates money transfer in real time and on a gross settlement basis.

• Real-time means the transfer happens instantly. There’s no waiting for the next cycle or batch, unlike NEFT (National Electronic Funds Transfer), which processes payments in intervals.

• Gross settlement means that every transaction is settled separately, not batched with others. As soon as a payment clears, it is irreversible.

In India, RTGS is run and managed by the Reserve Bank of India (RBI).

With its speed and security, it is applicable to various sectors, including:

• Corporations: For payments to vendors, inter-company transactions, and salaries, allowing for the timely settlement of large-value transactions.

• Import-export: Enables timely payment to suppliers and acceptance of funds, facilitating smoother trade activities.

• High-value transactions: Ideal for property transactions, bulk investment, and a single large payment that demands immediate and secure transfer.

• SMEs: Facilitates smooth handling of important cash flows and vendor payments, reducing delays in routine operations.

Now that we know what is RTGS, you may think it’s simply another bank transfer, but it isn’t. Here’s a step-by-step flow:

Initiation: You submit the RTGS request either online or by visiting the branch.

Processing: The bank verifies the information and then forwards the request to the RBI's RTGS system.

Settlement: RBI credits the account of the receiving bank and debits the sender bank at once.

Credit to beneficiary: The recipient bank credits the beneficiary's account virtually instantly.

Here are the features that make RTGS stand out from the rest:

1. High-value transfers: Designed for transactions above INR 2 lakh, without any cap on the amount.

1. Real-time settlement: Payments are one at a time, rather than in batches.

1. Safe system: RTGS is processed directly by the Reserve Bank of India (RBI), with rigorous fraud protection and transparency.

1. Final and irrevocable: Once a transfer has been made, it isn’t reversible.

1. Nationwide coverage: Most major Indian banks are linked to the RTGS network, thus making it easily available to people and organizations.

Why do more companies and people opt for RTGS compared to other payment systems? The answers are simple:

• Speed: Payments settle nearly in real-time, which is perfect for high-priority or time-critical transfers.

• Certainty: Once the funds have been credited, the money can be used at once. No "pending" status or waiting for end-of-day settlement. 

• Transparency: With RTGS, you always know the position of the money. There are no hidden queues or uncertainties.

• Security: Run and regulated by the RBI, RTGS transactions are supported with robust security protocols and strict regulatory safeguards.

• Global alignment: Most countries use similar systems, so it is the global standard for high-value payments.

There are two main ways to initiate an RTGS transfer:

Online (Net Banking/Mobile Banking)

If you have internet or a mobile banking facility, this is the easiest option.

• Log in, select the RTGS option, fill in the beneficiary's information, and confirm the payment.

• It's quick, easy, and at your fingertips without going to the bank.

Offline (Bank Branch)

• If you’d like to go in person, you can initiate RTGS by visiting your bank branch.

• You'll have to complete an RTGS application form with the details of the beneficiary, such as account number, name of the bank, IFSC code, and amount.

• After verification and authorization, the bank sends it through the RTGS system.

Both of them ultimately come into the RBI's RTGS network for settlement. The decision is up to you.

For a successful transfer, you'll need to provide:

1. Amount to be transferred: The specific amount you wish to transfer.
2. Beneficiary's name: Exactly as it is in the bank records.
3. Beneficiary's bank name and branch: So that they know where the account is maintained.
4. IFSC code of the beneficiary's branch: A 11-digit code that helps identify the receiver’s bank and branch.
5. Beneficiary's account number: Identifies the receiver’s account in the bank’s branch. 
6. Sender's account number: From which account the money will be deducted.

In India, RTGS is available 24x7x365, a change introduced in December 2020. This means you’re no longer tied to banking hours or working days. Whether it's a working day, weekend, or even a public holiday, you can make an RTGS transfer online at your convenience.

For businesses, it means supplier payments or urgent settlements don’t have to wait until “the next working day.” For individuals, it offers peace of mind. Whether you’re paying for property, education, or any other high-value expense, you can do it on your own schedule.

RTGS is designed for large-value transfers, and here’s how the limits work:

• Minimum amount: INR 2 lakh (RTGS won’t apply for smaller transfers).
• Maximum amount: No limit. Ideal for high-value payments, business or personal.

Charges

• Inward transactions: Always free, as per RBI guidelines.

• Online (Net Banking/Mobile Banking): Most banks now provide RTGS free of charge when done digitally.

• Offline (Bank Branch): There could still be a nominal charge if you fill out an RTGS form at the branch. Banks generally levy a small slab-based charge (e.g., INR 25 - 50), though there is some variation.

Moreover, GST (Goods and Services Tax) is levied on such charges of service. Notably, the RBI decides the maximum allowable RTGS charges annually, so banks cannot go beyond the set limit.

Online or offline, it's made to be as simple as possible.

Online mode (Net banking / Mobile banking):

1. Log in to your internet or mobile banking website.
2. Click on "Funds Transfer" and select RTGS.
3. Fill in the beneficiary's information and the amount of transfer.
4. Validate the transaction with an OTP or a security token.
5. Confirm and submit. You’ll receive a UTR number. The transfer is executed in real time.

Offline mode (Bank branch):

1. Go to your local branch and ask for an RTGS application form.
2. Fill up beneficiary details, IFSC, and the amount to be transferred.
3. Submit and authorize the transaction.
4. The bank checks the details and initiates it into the RTGS system.

Both options are safe and reliable, with money normally credited to the recipient's account within minutes.

Each payment system has its own purpose. Here’s how they stack up:

RTGS is a safe system, but it has some disadvantages. These include:

1. Restrictions on cross-border: RTGS is utilized for local payments within India. Systems like SWIFT (Society for Worldwide Interbank Financial Telecommunication) are still used for cross-border payments.
2. Restricted coverage: If the receiving bank is not a part of the RTGS network, your transfer simply will not go through.
3. Human errors: A typo in the IFSC code or account number might hold up or even refuse a transfer.
4. High-value emphasis: Small-value transactions cannot be done with RTGS because the amount has to be at least INR 2 lakhs. You’ll need to send it through NEFT (National Electronic Funds Transfer) or IMPS.

Before hitting “confirm,” check:

1. Accuracy of details: Especially the account numbers and IFSC codes - a single typo can prevent your transfer, or worse, deposit money into the wrong account.
2. Bank-specific timetables: RTGS operates 24/7. However, internal banks may have intra-day cut-off times for same-day processing.
3. Beneficiary setup: When you add a new beneficiary, there’s a brief cooling-off period after which transfers can be made.
4. Charges: While online RTGS is usually free, branch-initiated or offline payments may bear charges.

As RTGS is directly handled by the Reserve Bank of India (RBI), the system is under tight regulatory surveillance. To ensure protection for users and integrity, RTGS transactions have various layers of security, including:

1. Multi-factor authentication: Only the account holder can approve online transfers.
2. Data encryption and firewalls: Protect sensitive information against interception or abuse.
3. Real-time monitoring: Suspicious activity is brought into focus in real time to prevent fraud or technical mistakes.
4. Compliance reporting: Large-value transactions are tracked and reported under RBI and government regulations.

Sure, RTGS is fast. But only if your business transactions end at India's borders. Add cross-border collections to the mix, and the cracks begin to emerge: mismatched currencies, compliance overload, and opaque charges, to name a few.

Xflow bridges that gap.

By bringing RTGS into its wider cross-border payment stack, Xflow assists you in collecting and transferring money with ease. Rather than having to move through several systems, you have one integrated interface designed for scale.

Here's how Xflow makes RTGS better for you:

• Multi-rail support: Roll all of RTGS, NEFT, IMPS, and UPI into one strong API-based stack.
• Global capability: Accept payments in INR with 0 hidden conversion fee.
• Regulatory confidence: Xflow works with its partner banks to manage complicated compliance requirements, so you don't have to.
• Clear pricing: Competitive mid-market exchange rates with zero FX markup.