Aims Rtgs New

8/2/2019 Aims Rtgs New

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Innovations in Electronic BankingSysten: RTGS (Real Time GrossSettlement)

Presentation by :Dr.Narinder Kumar Bhasin ,Vice president & Branch Head , Axis Bank Limited ,

New Delhi


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RTGS ?RTGS is

An inter-bank fund transfer system (settlement)

Settling funds on a transaction by transaction basis(gross)

As and when the transactions are triggered (real time)

Assuring finality of settlement (irrevocable fundstransfer)

Primarily catering to large value funds transfer betweenbanks


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Payment SystemsPayment and settlement systems form the backbone of any economy.They are the conduits or the arteries for conducting trade, commerceand other forms of economic activities including remittances in anycountry.

An efficient payments system can be envisaged as the lubricant whichspeeds up the liquidity flow in the economy, thereby creating thenecessary impetus and momentum for economic growth.The payments process is a vital aspect of financial intermediation; itenables the creation and transfer of liquidity among different economicagents.

A smooth, well functioning and regulated payments system thus notonly ensures efficient utilization of scarce resources but also eliminatessystemic risks.The payments and settlement system is, therefore, a crucialcomponent of the financial infrastructure of any country and more so of a country like ours.


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Electronic Payment SystemsThis "electronic" payment system is normallymaintained or controlled by the Central Bank of acountry.There is no physical exchange of money; the CentralBank makes adjustments in the electronic accountsof 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, besidesgiving an accurate picture of an institution's accountat any point of time.


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Broad Framework:

With a view to rationalize the service charges levied by banks for offering variouselectronic products, a broad framework has been mandated as under:a) Inward transactions Free, no charge to be leviedb) Outward transactions

2 lakh to `. 5 lakh - not exceeding 25 per transaction.

Above ` 5 lakh not exceeding ` 50 per transactionThe remitting customer has to furnish the following information to a bank foreffecting a RTGS remittance:Amount to be remittedRemitting customers account number which is to be debited Name of the beneficiary bankName of the beneficiary customerAccount number of the beneficiary customerSender to receiver information, if anyThe IFSC Number of the receiving branch


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RTGS - ProcessReal time gross settlement systems (RTGS) are funds transfersystems where transfer of money or securities takes place fromone 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 toone basis without bunching or netting with any othertransaction.Once processed, payments are final and irrevocable. RTGS is aninter-bank fund transfer system (settlement) Settling funds on atransaction by transaction basis (gross). As and when the transactions are triggered (real time) Assuringfinality of settlement (irrevocable funds transfer) .Primarilycatering to large value funds transfer between banks.


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RTGS -VolumesThe RTGS system was introduced in India in March2004 and now extends to 77,093 branches as at theend of June 2011.RTGS settles gross inter-bank and customer (Rs.2lakh and above) transactions. On an average RTGSsettles 1.8 lakh transactions with a value of Rs. 4trillion on a daily basis.Considering the importance of RTGS for settling largevalue payment systems, action has been initiated forputting in place a Next-Gen RTGS.RTGS in India is equivalent to the global internationalelectronic payment systems like:


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RTGS

Global Payment SystemsCHIPS: Clearing House Interbank Payments System. Aninterbank payment system related to international trade, CHIPSis used for the transfer of international trade dollars. CHIPS isused by both Fedwire and S.W.I.F.T.

CHAPS: Clearing House Automated Payments System. Operatedby the Bankers Clearing House of London, CHAPS is used forinterbank messaging and wire transfer involving British Pounds.BOJNET: Electronic wire transfer system overseen by the Bank of Japan.FUNDS WIRING SERVICES: Although there are many wiretransfer services, they must each use the basic services such asFedwire, S.W.I.F.T, or BOJNET. Examples of wire moneytransfer services are Western Union, Moneygram, Eurigro,Sterling Draft Service, and the various payment servicesavailable on the Internet.


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How it Works ?

Union Bank SBI

RBIUnion Bank

SBI

Debit Push TransactionsCan be Interbank or

CustomerIndividual Queue BasedModelRouted Through RBIEach bank can view itsPayments and Receipts


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RTGS Implementation andOperating Mechanism:

The implementation of RTGS systems by Central Banks throughout theworld is driven by the goal to minimize risk in high-value electronicpayment 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 tosettlement lags are eliminated.RTGS does not require core banking to be implemented acrossparticipating banks, since transactions are direct, with no centralprocessing or clearing operations.

Any RTGS employs two sets of queues: one for testing outgoing fundsavailability on a chronological FIFO basis with the option of prioritizingspecific inquiries, while the other queue is for processing debit/creditrequests received from the central bank's Integrated Accounting System .The
http://en.wikipedia.org/wiki/Core_bankinghttp://en.wikipedia.org/wiki/FIFOhttp://en.wikipedia.org/wiki/Integrated_Accounting_Systemhttp://en.wikipedia.org/wiki/Integrated_Accounting_Systemhttp://en.wikipedia.org/wiki/FIFOhttp://en.wikipedia.org/wiki/Core_banking


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RTGS - Features.The main features of RTGS are:Debit Push Transactions

Can be Interbank or CustomerIndividual Queue Based ModelRouted Through RBI

Each bank can view its Payments andReceipts


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RTGS vis--vis the present clearingsystem?

Present Clearing System RTGS SystemSettlement Basis Net Gross

Time of Settlement At specified times Transactions are settled oncontinuous basisSystem based on Physical instruments Electronic messages

Transaction initiated byPerson receiving payment(payee)

Person making payment(payer)

Receipt of funds High Value: Day 0 Day 0Local Instruments: Day 1

Outstation Instruments:Depends upon the location

Finality of Settlement Only after return clearingSettlement is immediate,final and irrevocable.

ReturnsCan result from insufficiency of funds, instrument being stale

Can result from incorrectaccount details etc.

The key differences are summarised below:


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The Big Picture RBIs View RBI has for sometime now been pursuing the establishment of a modern, robust and integrated payment and settlementsystem. Special focus has been placed on the building up of the System, required to facilitate large value inter-bank fundstransfer in secured environment.

In fact, RBI has adopted a three pronged approach -consolidation, development and integration.

Consolidation Computerized Cheque Clearing, ECS, EFTDevelopment Addition of clearing houses, de-regulation

and Interconnectivity through InfinetIntegration of various payment and settlement systems RTGS

Bottom Line Customer Interest First !!


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Why RTGS ?It is an approach to risk reduction, RTGS aims atreducing inter-bank settlement risk.Transactions across RTGS move only where theremitter (the sending bank ) has the liquidity.

This assures receivers of receiver finality bothcustomers and the receiving Banks.This discipline will reduce domestic and internationalsystemic risk. It is a significant step towardseliminating cross border risks associated with

settlement of foreign currency transactions.This will provide Delivery versus Payment (DVP)settlements to government and commercial equitiesand securities systems.


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General ImpactsThough impacts of the rollout of these systems tends to bespecific to the banking infrastructure within each country,however certain generic impacts are enumerated below:

Banking business moves from a float to a fee basedrevenue generation model

New and existing business processes move to use the RTGSsystem/channel for funds transferCustomer demands change and push their banks to provideproducts and services which are different to those providedbefore RTGS implementation

Change in the antiquated mechanisms that were notproviding adequate support for efficient and risk-reducedfunds transfer mechanisms.By implementation of operational control and STP (StraightThorugh Processing) solutions for payments, participatingbanks have been able to differentiate themselves in the

changing market.


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Specific ImpactsTruncation of physical instruments

Payments requests can be made electronically or throughphysical instructions to banks

No distinction between high value and MICR clearing, asprevalent today

Funds can be utilised throughout the clearing day againstinformation flowing in during the day, improving float management

Probable levying of transaction charges by Banks for paymentsas against the present float earnings route available to bankstoday


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What it would mean to the Customer?

RTGS PaymentsRTGS receiptsIntra Day Credit/Liquidity

Seamless STPIntegration with Corporate TreasuryEnhanced Cash Management Services

Competitive pricing


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Advantage ... CustomerQuicker settlement cycles

Assured finality of settlementIntra Day Credit/Liquidity

Reduced operational risk of fraud and loss of chequesSecure transactionsControlled flow of transactionsWider day time window for Collection / PaymentCuts across geographical boundariesCuts across Inter Bank and Clearing House Settlementissues


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NextGen RTGS:Steps have been initiated to replace the existingRTGS system with the Next Generation Real TimeGross Settlement (NG-RTGS) by adopting the latest

technology and emerging business processes.Some of the new features proposed to beimplemented in the NG-RTGS system are advancedliquidity management facility;Extensible mark up language (XML) based messagingsystem conforming to ISO 20022; and real timeinformation and transaction monitoring and controlsystems.


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RTGS Settlement of Inter bank paymentsystems in real timeon line mode ,one by one,

On gross basis withIntra day finality.


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Thanks

DR.Narinder Kumar [email protected] ,[email protected]

Mobile :9910110182
mailto:[email protected]:[email protected]:[email protected]:[email protected]

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