What Is RTGS and How it Works

Illustrations by Drishya Subramaniam

What Is RTGS?

The Real-Time Gross Settlement (RTGS) system is a specialised electronic funds transfer system for high-value and time-sensitive transactions between financial institutions. In an RTGS system, transactions are processed immediately and individually, without grouping with other payments. This ensures swift and secure fund transfers, minimising credit and liquidity risks. RTGS systems are commonly used for significant transfers like interbank settlements, large corporate transactions, government-related payments, and international remittances. Due to its instantaneous nature and guaranteed finality, RTGS plays a vital role in improving the efficiency and stability of the financial system, enabling smoother money movement in a rapidly evolving global economy.

Let’s now understand how RTGS works.

How does RTGS work?

A real-time settlement indicates that payment transferred will be initiated and processed and will be received in an instant. Let’s take a look at the following steps on how RTGS works:

Step 1: Initiation Process
The first step is the initiation process, where the payer (sender) here first initiates an RTGS transaction by providing the necessary details, including the recipient’s (payee’s) bank account number, name, and the amount to be transferred. Then the payer’s bank verifies the availability of funds in their account.

Step 2: Verification of Settlement Message
After the initiation process, the RTGS system receives the settlement message and verifies the authenticity and accuracy of the information. It performs essential checks such as validating the sender’s account, ensuring compliance with regulatory requirements, and confirming the availability of funds.

Step 3: Funds Transfer
When the settlement message is verified, the RTGS system authorises to debit from the sender’s account for the transaction amount and simultaneously credits the recipient’s account with the same amount. This transfer of funds happens instantly.

Step 4: Confirmation
After the funds are transferred, the RTGS system generates confirmations for both the sender and the recipient. These confirmations usually include transaction details, such as the transaction reference number, timestamp, and the updated account balances of the sender and recipient.

What are the uses of RTGS?

RTGS is used for various purposes in the financial sector. The following points highlight the key uses of RTGS:

- Real Estate Transactions: RTGS is often utilised where significant amounts of money are involved, such as in real estate transactions. It ensures swift and secure funds transfer for property purchases, sales, and other related transactions.

- High-priority Payments: One of the reasons why RTGS payment is the most reliable in need of the time is because it’s super convenient as it is also meant to use during high-priority situations. This works well when an immediate settlement is required, such as emergency healthcare, salary payments, or disaster relief funds and even when a critical supplier payment is required.

- International Transfers: In some cases, RTGS systems can facilitate transfers between banks in different countries. Bilateral or multilateral arrangements between countries enable real-time funds settlement, improving international payments’ efficiency.

- Government Transactions: RTGS is often used for various government-related transactions, including payment of taxes, customs duties, subsidies, pensions, and other government-to-individual or government-to-government payments.

How to make an RTGS transaction?

To make an RTGS transaction, you generally need to follow these steps:

Step 1: Banking Channel Selection
Depending on the available options provided by your bank, go to your bank branch, or you can even access your online banking portal.

Step 2: Provide Transaction Details
Make sure to provide all the required information for the RTGS transaction. This usually includes the recipient’s bank account details, account number, account holder’s name, bank branch name etc.

Step 3: Verify your Account
The next step is where the bank will verify if your bank account has sufficient funds for the required RTGS transaction. Here, they could also verify your identity as part of the KYC (Know Your Customer) process.

Step 4: Fill out the Form
After completing the verification process, the next step is to fill out an RTGS form. Ensure to mention the correct details of all the necessary transactions involved. This includes your account, receivers’ account details etc.

Step 5: Submit the Request
Once you complete the form, double-check the details and submit the RTGS transaction request form to your bank. If you opt through an online banking portal, you can initiate the transaction through the bank’s online or mobile banking app.

Step 6: Receive Transaction Confirmation
Once the transaction is completed, your bank will process the RTGS transaction. You will receive a confirmation or acknowledgement from the bank, usually as a transaction reference number or an SMS notification.

Please note making an RTGS transaction as per the bank could vary from bank to bank.

What Are the Charges Applicable on RTGS Transactions?

The following table will give you an insight into the charges applicable to RTGS transactions:

Type of Transaction Charges Applicable
Inward transaction No charges
Online transaction (Mobile transaction/ Netbanking) No charges
Outward transactions (amount= 2-5 Lakh) Rs 30
External transactions (amount< 5 Lakh) Rs 55

What are the benefits of RTGS?

RTGS offers several benefits, making it one of the most preferred methods of transferring amounts for various purposes. Here are some of the key benefits listed below:

- Real-time Settlement: One of the best perks of RTGS transactions is how it instantly processes them in real time. In other words, opting for an RTGS transaction works best for immediate settlement. The amount is immediately available to the recipient when the transaction is initiated and processed through this system. This avoids needing a waiting period or any delays associated with other payment methods.

- Safety and Security: The amount paid through the RTGS payment is transferred electronically through the banks, making the chances of loss, theft or fraud less likely. And when once the transaction is credited to the recipient’s account, the amount cannot be reversed or cancelled. Thus payment through RTGS makes it safe, secure and reliable.

- Accurate Record-keeping: RTGS system follows an accurate and transparent record-keeping. The RTGS system tracks all transaction details, such as the sender’s and recipient’s details, transaction amounts, time stand, etc. This provides a transparent audit trail and simplifies reconciliation processes for banks and businesses.

- High-value Transactions: RTGS transactions are perfectly designed for high-valued transactions, which makes them suitable for large businesses, government transactions, corporate payments, interbank transfers etc. This system can handle immediate transactions, making the payment process easier and seamless without losing liquidity and the ability to manage better cash flow management.

What are the common reasons for RTGS transaction failure?

The RTGS payment system is designed to be secure and convenient for significant transactions, but there are instances where a transaction could fail. Let’s check out what are the possible reasons for RTGS transaction failures:

- Insufficient funds: If the sender’s account does not have the required balance or enough amount, for that matter, to cover the transaction amount, there’s a high possibility that the transaction could fail. The RTGS system verifies the availability of funds before processing the required transaction. So make sure to have enough amount before proceeding with RTGS transactions.

- Connective Issues: RTGS system relies on a stable and reliable network, so there are no disruptions when the payment is processed. But having unstable connective issues or a slow network could hamper the payment process, thus resulting in payment failure.

- Inaccurate or Incomplete Transaction Details: One of the important check here would be giving accurate and valid details such as the recipient’s bank account number, name and other necessary financial information before proceeding with the RTGS transaction. The transaction may fail if any of these details are incomplete or incorrect.

- Technical Issues: Another common possibility for a failed RTGS transaction is the occurrence of technical glitches or any system failure from the RTGS system or the recipient’s bank. Technical problems such as software bugs or hardware failures could result in failed RTGS transactions.

- Compliance and Regulatory Issues: RTGS transactions are subject to various compliance and regulatory requirements, such as anti-money laundering (AML) and Know Your Customer (KYC) regulations. If a transaction fails to meet these requirements or triggers suspicious activity alerts, the banks or regulatory authorities may reject or block it.

Thus, RTGS is a financial transaction system that enables real-time transfer between banks and businesses. As it’s commonly used for high-value transactions, RTGS facilitates fast, reliable, and transparent financial transactions.


1. What is required for an RTGS transfer?

  • To make an RTGS transfer, you will require the following:
  • The amount necessary for the transaction
  • Beneficiary account holder’s name
  • Beneficiary account number
  • Beneficiary account IFSC
  • Name of the beneficiary bank and bank branch

2. Do all the banks in India have an RTGS system available?
No, only a few banks in India have the RTGS system enabled.

3. What are the banks that allow RTGS transfers in India?
Banks in India such as HDFC Bank, ICICI Bank, The State Bank of India, Axis and RBL allow RTGS transfers.