Real Time Gross Settlement System (RTGS)
RTGS is a large value funds transfer system whereby financial intermediaries can settle interbank transfers for their own account as well as for their customers. The system effects final settlement of interbank funds transfers on a continuous, transaction- by-transaction basis throughout the processing day.
The statistics of transactions for the month of March 2004 shows that in the interbank market transactions involving 45000 instruments and aggregating Rs 1,79,000 crore were settled. High value instruments (3,17,000) settlement aggregated Rs 2,74,000 crore. However, settlement of MICR instruments (145 lakhs) accounted for only Rs 54,000 crore. RTGS will eliminate settlement risk in the case of interbank and high value transactions.
The system went ‘live’ on March 26 with State Bank of India, HDFC Bank, Standard Chartered Bank, and Saraswat Co-operative bank. The Reserve Bank of India expects 120 scheduled commercial banks and primary dealers to become part of the real time gross settlement system (RTGS) by June 2004. ICICI Bank, IndusInd Bank, BNP Paribas, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Corporation Bank and Union Bank of India are likely to join shortly.
Banks could use balances maintained under the cash reserve ratio (CRR) instead of the intra-day liquidity (IDL) to be supplied by the central bank for meeting any eventuality arising out of the real time gross settlement (RTGS). The RBI has fixed the IDL limit for banks to three times their net owned fund (NOF).
The IDL will be charged at Rs 25 per transaction entered into by the bank on the RTGS platform. The marketable securities and treasury bills will have to be placed as collateral with a margin of five per cent. However, the apex bank will also impose severe penalties if the IDL is not paid back at the end of the day.
AN UPDATE (11th May 2004): 19 more banks have joined RBI's online clearing and settlement system, Real Time Gross Settlement (RTGS) over the last few days. There are now a total of 23 banks conducting transactions on the new system. This include, Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank of India, Indian Overseas Bank, Central Bank of India, Dena Bank, BNP Baripas, IndusInd Bank, ING Vysya Bank. Out of the total 23 banks, the early batch of four banks State Bank of India, HDFC Bank, Standard Chartered Bank and Saraswat Bank have already embarked upon customer transactions.
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