In order to boost the adoption of digital payments further, the Reserve Bank of India last week allowed the transfer of funds through Real-Time Gross Settlement (RTGS) round-the-clock, 365 days a year from 1 December. Currently, RTGS is available on all working days of the bank till around 6pm. RTGS timings may vary from bank to bank.
Experts believe this flexibility will support businesses and help them in managing cash flows more efficiently. RTGS has a minimum transfer limit of ₹2 lakh, with no upper limit, so it’s generally used by businesses or individuals for making high-value transactions. Money transfer through RTGS is free of cost.
“By making it available 24×7, basically RBI has created an enabling sort of atmosphere for commerce, in general, to operate 24×7 as now money transactions can also happen on a daily basis while earlier businesses had to plan their fund transfer to be made using RTGS keeping in mind Sunday or holidays or the daily time limit of 6pm,” said Murali Nair, president, banking, Zeta.
In some cases, the working capital requirement may also go down. Explaining with an example, Nair said that at times businesses have to transfer salaries to employees’ accounts a day or two days in advance in case the last working day is a holiday or a Sunday, now they can do it on the last day of the month and don’t have to plan in advance, thus reducing their working capital requirement.
“Payments and money flow will happen faster. By making it available 24×7, people will be able to manage their cash flows better,” said Akash Gehani, chief operating officer and co-founder Instamojo, a payment gateway and e-commerce platform.
Another reason for the popularity of RTGS among businesses is it happens on a real-time basis. RTGS fund transfers are based on gross settlement meaning every transaction is settled individually rather than in batches which is the case with National Electronic Fund Transfer or NEFT.
NEFT and Immediate Payment Service (IMPS) are already available 24×7. NEFT was made available 24×7 last year. But these fund transfer modes are generally used by individuals as there is no minimum threshold limit for the amount to be transferred. In case of IMPS, the cap is ₹2 lakh per day on fund transfer, while in the case of NEFT, banks generally put an upper cap on daily third-party fund transfer in order to limit the risk in case of a wrongful transaction or fraud. There is no cap on fund transfer through NEFT and RTGS.
Making RTGS available round the clock will also help certain businesses in servicing their clients better. “We think it will help financial services companies in fulfilling payment requests post-market hours late in the day which may not be possible now,” said Nikhil Kamath, co-founder and chief investment officer of Zerodha.