RTGSsystem

RTGSsystem stands for real-time gross settlement system, a class of payment systems used by central banks or designated authorities to settle interbank transfers immediately and on a gross basis. In an RTGS system, each transfer is processed in real time and settled individually, with settlement finality typically achieved as soon as the transaction is completed. Because there is no netting against other payments, RTGS systems greatly reduce settlement risk in the interbank market, although they place a premium on available liquidity.

Operation and features: Banks submit payment instructions to the RTGS system, which validates funds, debits the payer’s account, and credits the recipient’s account if enough liquidity is available. If liquidity is insufficient, the instruction may be queued or rejected according to policy. Intraday liquidity facilities, often provided by the central bank, help participants manage short-term funding needs, frequently backed by collateral. Once a transfer is settled, it is usually irrevocable and unconditional, contributing to the system’s finality and reliability. RTGS systems are designed with risk controls, operational resilience, and comprehensive audit trails.

Scope and role: RTGS systems are typically used for high-value and time-critical interbank transfers, wholesale payments, and central-bank settlements. They support monetary policy transmission, financial market settlement, and systemic stability by ensuring real-time, final settlement of funds.

Examples: Notable RTGS systems include the Fedwire Funds Service in the United States, CHAPS in the United Kingdom, TARGET2 in the euro area, and India’s RTGS system. Governance generally resides with the central bank or a designated operator, under tight regulatory oversight.