Detailed overview of real-time gross settlement (RTGS)

RTGS’s full form in banking is “Real-time gross settlement of fund-transfers”. It is a settlement between the different banks in either funds or securities. People exchange funds, and when payments are made to one another, they need to be cleared through a process called RTGS. In this article, we will talk about what RTGS is, its full meaning and features of it, and payment and transfer details. 

What is a real-time gross settlement (RTGS)?

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Well, what is the RTGS full form in English? The real-time gross settlement is the long-form of RTGS. It is a process of settlement of payments in the banks during which the funds and securities are transferred instantly by the central banks. It is a continuous one, and the settlement of payments is carried out without debit and credits being net. RTGS works as the best payment method if you need to transfer large amounts of funds in real-time.

To understand what an RTGS transaction is, you can consider the below given an example. 

It is very common for transactions to take place between different banks. Let’s say if you are transferring funds to someone with an account in another bank; your bank also has to settle this transaction.

How real-time gross settlement (RTGS) works

The RTGS abbreviation contains a reference to “real-time”. This means that the payment settlement has to be carried out immediately. There is no waiting period involved. This is the meaning of RTGS in banking. 

The RTGS bank transfer accounts for this kind of settlement are based on an individual account rather than on a bunch of transactions grouped. When the sending bank sends the payment, it will be settled immediately in the receiving bank.

RTGS vs. Bankers’ Automated Clearing Services (BACS)

The real-time gross settlement system is distinct from net settlement systems, including Bacs Payment Schemes Limited, formerly known as Bankers’ Automated Clearing Services (BACS). If you compare RTGS payment processing and BACS, you will find a massive difference between these procedures:

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  • In the case of BACS, the banks accumulate the payments they receive throughout the day, and at the end of the day, transactions are settled by net balance. 
  • RTGS is an instant transfer in the banking system, which takes place electronically without any physical disbursement of funds. For example, the balance of the sending bank will decrease by $100,000, while the balance of the receiving bank will increase by $100,000.

Let’s look at the advantages of RTGS in more detail.

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Benefits of real-time gross settlement (RTGS)

RTGS is now a commonly used process of payment settlement across the globe because of being a less risky and efficient means to settle payments.

One of the most outstanding features of the RTGS payment method is that since the transaction settlement is done immediately, there is no window for threats of hacking to be present. In the other payment settlement methods, time is the main factor that can lead to the evolution of cybercrimes like phishing and data theft.

After the involvement of RTGS, the payment settlement timeframe has virtually disappeared; hence the chance of data theft by hackers has also reduced. 

Another benefit of RTGS is that it is the most suitable option for high-value transactions as they usually carry a huge risk. Transactions take place online, so there is no physical transfer of sum involved and the associated risks.

The RTGS payment system works all around the clock and throughout the year, so no matter when an RTGS transfer is needed, it can be carried out immediately.


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RTGS is a commonly considered approach to settle down the gross transfers between banks. RTGS expands access to real-time payments for a large number of bank customers who need to transfer funds.

Despite the security of RTGS transactions, there is always risk in investing. You must be careful, especially when it comes to large sums.

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