RTGS
Also written Real Time Gross Settlement
Real Time Gross Settlement — electronic transfer in which funds move from one bank to another immediately, used for transactions above Rs 2 lakh with no upper ceiling.
In plain language
RTGS is the fast lane of bank transfers. The workbook defines it as a facility to move funds electronically on an instant basis: funds are immediately transferred from one bank to another.
Two words in the name carry the meaning. Real time — each transfer settles as it happens rather than waiting for a batch, which is what separates RTGS from NEFT. Gross — each transaction is settled on its own, in full.
Because it is built for size, RTGS is used for transactions above Rs 2 lakh, with no upper ceiling. For a mutual fund, it is the payment route of choice when a large sum has to reach a scheme's account before a cut-off time.
How it works
| Feature | RTGS | NEFT |
|---|---|---|
| Settlement | Instant, transaction by transaction | Batch processing |
| Amount | Above Rs 2 lakh, no upper ceiling | No RBI limit |
| Charges | Waived by RBI instruction | Waived from savings accounts from 1 January 2020 |
The instant credit matters most in liquid funds, where the pricing rule turns on whether funds are available for utilisation before the 1.30 pm cut-off, without availing any credit facility, intra-day or otherwise:
- Application received up to cut-off and funds available before cut-off → closing NAV of the day immediately preceding the day of receipt.
- Application after cut-off, funds available the same day → closing NAV of the day immediately preceding the next business day.
- Funds not available before cut-off, whenever the application came → closing NAV of the day immediately preceding the day the funds are available.
The workbook explains why liquid funds have an earlier cut-off at all: liquid fund remittances may be made electronically and deployed on the same day. The RTA must ensure clear funds are available at the time of allotment of liquid fund units.
On the way out, RTGS is one of the channels — with NEFT, IMPS and direct credit — that AMCs may use for redemptions, IDCW and refunds, and that RTAs use for transfer of dividend in corporate actions.
A worked example
Illustrative numbers and dates. Wednesday and Thursday are business days.
The treasurer of a manufacturing company invests Rs 50 crore of surplus cash in a liquid fund, submitting the application at 11.00 am on Wednesday.
Stamp duty at 0.005% is Rs 25,000, leaving Rs 49,99,75,000.
| NAV | Per unit |
|---|---|
| Tuesday closing | Rs 4,000.0000 |
| Wednesday closing | Rs 4,000.6600 |
Paid by RTGS at 12.45 pm. Funds reach the scheme's account immediately — before 1.30 pm, from the company's own balance, not an overdraft. The closing NAV of the day immediately preceding the day of receipt applies: Tuesday's.
49,99,75,000 ÷ 4,000.0000 = 1,24,993.750 units
Funds available only at 2.15 pm the same day. The application was on time but the money was not: funds were not available for utilisation before the cut-off. Following the workbook's own worked week, money realised after the cut-off on a business day is priced at the closing NAV of the day immediately preceding the next business day — here Wednesday's:
49,99,75,000 ÷ 4,000.6600 = 1,24,973.129 units
The difference is about 20.62 units, worth roughly Rs 82,500 — one day of interest accrual on Rs 50 crore, lost to the clock. And if the 12.45 pm credit had been funded by an intra-day credit line, it would not count as available funds at all.
Why NISM asks about it
Chapter 13 (Banking Operations in Mutual Funds) defines RTGS in section 13.1.1, and its sample question asks which electronic transfer method moves funds instantaneously — RTGS, against standing instruction, bank mandate and bearer cheque. Chapter 11 (Operational Concepts of Mutual Funds) supplies the liquid fund pricing rules in Table 11.1 that make instant credit matter, and Chapter 6 lists dividend transfer through NEFT or RTGS as an RTA corporate-action duty.
Common exam traps
- RTGS is for transactions above Rs 2 lakh. There is a floor and no upper ceiling — do not reverse them.
- Instant, not batch. Batch processing is NEFT.
- Charges are waived for RTGS by RBI instruction, as for NEFT.
- Speed does not beat the "clear funds" test. Money funded by any credit facility, intra-day or otherwise, does not count as available for liquid fund pricing.
- Liquid fund purchase cut-off is 1.30 pm; redemptions cut off at 3.00 pm.
- Within cut-off with funds before cut-off earns the previous day's NAV in a liquid fund — the day immediately preceding the day of receipt.
- RTGS is a payment channel, not a KYC or third-party control. The source account must still be verifiable as the investor's.
Where this is taught
Free preparation for NISM Series II-BRelated terms
- Corporate actionAn event initiated by a company that changes the securities it has issued — dividend, buyback, bonus, split, consolidation, rights issue or merger — and which the registrar has to execute investor by investor.
- Cut-off timeThe SEBI-prescribed clock time that, read together with the time stamp on the request, decides which day's NAV a mutual fund transaction is priced at.
- Instant Access FacilityA facility that credits redemption proceeds to a resident individual investor's bank account on the same day, offered only in overnight and liquid schemes and only through the AMC's own website or app.
- NEFTNational Electronic Funds Transfer — a nation-wide system that moves money between bank accounts in batches, round the clock, with no RBI-imposed amount limit; a standard route for mutual fund purchases and pay-outs.
- NIGOA transaction the registrar has flagged as "Not in Good Order" because the application and the money do not reconcile or the paperwork is defective — units are not issued until it is fixed.
- NPCIThe National Payments Corporation of India — the umbrella body for retail payments and settlement, set up with RBI and IBA support, which runs NACH and the account validation used to verify investors' bank accounts.
- Request for Quote (RFQ) platformThe exchange platform, launched in early 2020, on which participants seek and respond to quotes to execute and settle trades in debt securities, with an audit trail that brings pre-trade transparency to an OTC market.
- Unified Payment InterfaceInstant 24x7 money transfer from a smartphone using a Virtual Payment Address. It can also block money for an IPO application, up to Rs 2 lakh per transaction in the booklet.