The Hindu Business Line : Online fund transfer system comes into being

NEARLY 3,000 bank branches across 275 cities/towns in the country are ready to go live on the online fund transfer system, Real Time Gross Settlement (RTGS). This would mean that a bank customer would be able to transfer funds instantaneously between any of these 3,000 branches.

"The RTGS system is being implemented at an all India level and banks have indicated that 3,000 branches across 275 locations are ready to go live on the system. Going forward even more branches will join this fold,'' said Mr R Gandhi, Chief General Manager-in-charge, Department of Information Technology, Reserve Bank of India.

RBI flagged off operations on the cutting-edge payment system on Friday in a limited manner amongst four banks in the country for treasury-related transactions, this will be extended to more banks and their branches in a phased manner.

For one person to transfer funds to another through the new system, there will be no cheque or draft involved.

One will have to go to an RTGS-enabled bank branch where one maintains an account, and give an online instruction for the funds to be credited to the beneficiary's account maintained in a branch, which too must be RTGS-enabled.

The funds will then be transferred in a flash.

Instantaneous fund transfer will, however, come at a cost to the customer. This charge will vary from bank to bank. Competitiveness should help rein it in. RBI has left it to the individual banks to design the fee structure, said Mr Gandhi.

RBI will charge the bank Rs 25 per transaction.

In order to be RTGS enabled, a bank branch needs to be fully computerised and networked.

The entire network of new private and foreign bank branches and many of the PSU bank branches across the country meet this criterion.

As RTGS roles out to customers, RBI expects about 20,000-25,000 cheques, which involve high-value customer transactions to migrate to RTGS.

The existent modes of money transfer through demand drafts, cheques, electronic fund transfer (EFT) may very well co-exist depending on how affordable RTGS-enabled services will be.

Currently, while a demand draft may take seven to ten days since it involves the physical movement of the draft between the remitter and beneficiary, EFT takes one to two days for the same but is available only in 13 cities in India.

RTGS will put India on par with the best practices in the world in terms of payment systems.

World over, RTGS is essentially meant for high-value clearing (i.e., inter-bank fund transfers and treasury-related transactions) thereby reducing settlement and systemic risk.

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