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Real-Time Gross Settlement (RTGS)


Real-Time Gross Settlement (RTGS) refers to a funds transfer system wherein transactions are settled instantly, on a one-to-one basis, without bundling or netting with other transactions. It ensures immediate and irrevocable transfer of funds between parties in real time. Central banks commonly use RTGS systems for high-value transactions and to maintain the stability and efficiency of the financial sector.


Real-Time Gross Settlement (RTGS) in phonetics can be transcribed as: /ˌriːəl ˈtaɪm ɡroʊs ˈsɛtlmənt/Here, individual syllables can be read as:- [ˌriːəl] (“ree-uhl”); real- [ˈtaɪm] (“time”); time- [ɡroʊs] (“gross”); gross- [ˈsɛtlmənt] (“set-lmuhnt”); settlement

Key Takeaways


  1. Real-time processing: RTGS systems facilitate the prompt and continuous transfer of funds between accounts on a transaction-by-transaction basis, without waiting for an end-of-day batch process. This allows for faster and more efficient settlement of high-value transactions.
  2. Gross settlement: Each transaction in an RTGS system is settled individually, which means that the risks associated with netting (combining multiple transactions) are eliminated. This provides a more secure environment for the transfer of large sums of money, as the transfer is considered final and irrevocable once processed.
  3. Primary tool for central banks: RTGS systems are commonly employed by central banks as a mechanism to manage and maintain liquidity in their respective financial markets. By providing a reliable and efficient infrastructure for high-value transactions, RTGS systems play a crucial role in ensuring the stability of a country’s financial system.


Real-Time Gross Settlement (RTGS) is a significant term in business and finance because it refers to a system that facilitates the immediate processing and final settlement of funds transfers on a one-to-one basis between banks. By providing near-instantaneous transaction completion, RTGS systems considerably reduce counterparty risk and significantly improve the efficiency and security of high-value monetary transactions. This not only ensures effective fund management and liquidity for financial institutions but also bolsters the overall stability and reliability of the financial system. As a result, Real-Time Gross Settlement plays a crucial role in reducing systemic risk and enhancing the speed of financial operations in modern economies.


Real-Time Gross Settlement (RTGS) serves a critical purpose in modern financial systems by facilitating the rapid and secure exchange of high-value transactions between banks and other financial institutions. The driving force behind RTGS is to minimize settlement risk and ensure the stability of the vast, interlinked web of transactions that underpin the global financial system. By allowing for the immediate transfer of funds on a transaction-by-transaction basis, RTGS systems substantially reduce the time it takes for funds to be moved between accounts, a marked improvement over traditional end-of-day batch processing. This speed and efficiency are essential for financial institutions, businesses, and governments that rely on large-scale transactions to function smoothly and maintain liquidity within their economies. In addition to expediting the movement of capital, Real-Time Gross Settlement systems incorporate advanced security and risk management features designed to safeguard the integrity of financial markets. RTGS systems employ sophisticated monitoring mechanisms, robust transaction validation, and secure communication channels to prevent fraud, errors, and other potential disruptions that could compromise the process. Moreover, since RTGS transactions are final and irrevocable, they provide greater certainty and transparency to participants, allowing them to manage their own risks more effectively. Overall, the RTGS framework helps to support a more stable and trustworthy financial landscape, laying the foundation for continued growth and innovation in the world of finance and business.


1. The United States – Fedwire Funds Service: Operated by the Federal Reserve System, the Fedwire Funds Service enables financial institutions in the United States to transfer funds between each other in real-time gross settlement, ensuring immediate and irrevocable transfers. It supports high-value, time-sensitive payments and plays a pivotal role in the US payments system. 2. Europe – TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System): TARGET2 is the Eurosystem’s RTGS platform for the processing of large-value euro payment transactions. It connects central banks, commercial banks, and other financial institutions across Europe, providing secure and efficient settlement services. As of November 2021, TARGET2 supports the instant payments scheme, the TARGET Instant Payment Settlement (TIPS). 3. India – Real Time Gross Settlement (RTGS) System: Launched by the Reserve Bank of India (RBI) in 2004, RTGS enables fund transfers between banks and financial institutions within the country in real-time. RTGS processes high-value transactions where the minimum transfer limit is INR 2 Lakhs. The system is secure, transparent, and facilitates quicker interstate transactions, ensuring the country’s financial stability and reducing systemic risks.

Frequently Asked Questions(FAQ)

What is Real-Time Gross Settlement (RTGS)?
Real-Time Gross Settlement (RTGS) is a money transfer system used by banks to process high-value transactions between financial institutions in real-time and on a gross basis, meaning that each transaction is settled individually without netting or bundling with other transactions.
How does RTGS differ from other money transfer systems?
Unlike other transfer systems like the Automated Clearing House (ACH) or Electronic Funds Transfer (EFT), which settle transactions in batches, RTGS transactions are processed immediately, providing faster settlement and reducing counterparty risk.
What are the key benefits of using RTGS?
The benefits of using RTGS include immediate and final settlement of transactions, elimination of credit and liquidity risks, reduced operational risks, and increased efficiency in the financial market.
Are there any limitations or drawbacks to the RTGS system?
Some limitations of the RTGS system include higher operational costs due to the individual settlement of transactions, limited accessibility as it’s generally restricted to large-value transactions between financial institutions, and reliance on participants to have adequate liquidity to complete transactions.
Which institutions can participate in RTGS?
Typically, central banks, commercial banks, and other financial institutions that hold accounts with the central bank can participate in RTGS systems.
Are there any minimum transaction values for using RTGS?
Yes, RTGS is designed for large-value transactions, so each system may have a minimum transaction value threshold defined by the respective central bank or regulatory authority. This threshold may vary across different jurisdictions.
What are the transaction fees associated with RTGS?
The transaction fees for RTGS may vary depending on the jurisdiction, the central bank’s policies, and the specific costs incurred by the financial institutions involved. Typically, fees for high-value transactions might be higher than those for lower-value transactions.
Can RTGS transactions be reversed or canceled?
RTGS transactions are considered final and irrevocable once they are processed. However, if there’s a need for a reversal due to an error or other factors, parties must initiate a separate transaction to reverse the original one.
What are the operating hours for RTGS?
RTGS operating hours are determined by the central bank or regulatory authority of each jurisdiction, and they usually correspond to the local business hours.
How long does it take for an RTGS transaction to be processed?
As the name suggests, Real-Time Gross Settlement transactions are processed in real-time, usually within seconds or minutes, depending on the particular system’s infrastructure and capacity.

Related Finance Terms

    • Funds Transfer
    • High-Value Payments
    • Liquidity Risk
    • Settlement Finality
    • Central Bank


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