The Real-time Gross Settlement System (RTGS) the world over, has been the preferred mode of settlement of large value inter-bank payments. RTGS, as a settlement process, minimizes settlement risks by way of individual payments in real-time, in the books of account held at the Central Bank. The scope of RTGS covers both the internal and external issues concerning a bank.

Real-time Gross Settlement (RTGS) system promoted by the RBI is expected to change the way money is transferred across the business community in general and banks in particular. The traditional payment system has an existing structure and legal framework. Concerned parties know their respective rights and obligations and the remedial procedures in the event of default/ failure of performance of contract etc.

Inter-bank rupee funds payments and at least high value customer clearing transactions are likely to go through the RTGS route initially. RTGS brings with it not only the efficiencies and speed of operation, but also various issues relating to obligations of parties, legal sanctity, remedies for failure or non-performance, etc. These issues need to be addressed before embarking upon the live operations of the system.

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