On March 26, 2004, Indian
Banking System established a key milestone when the RTGS (Real Time Gross
Settlement System) went live at 9.00 am.
According to a press release of
RBI, for the time being inter-bank transactions are being put through and the
customer related transfers will be enabled in due course.
After about two weeks, other banks/primary dealers will join
the System in a phased manner. Depending on their full technical and other
preparedness, eligible participants will join the System at an interval of a
week. It is expected that all prospective RTGS participants will join the System
in about three months.
The introduction of the electronic fund transfer in the
Banking system had been enabled with an amendment of the RBI Act along with the
passage of the Information Technology Act 2000 (ITA-2000). Further the
Negotiable Instruments Amendment Act 2002 and consequential amendments to
ITA-2000 had also cleared the legal grounds for introduction of electronic form
of cheques. In the light of these developments, RBI had been working on an
Inter-bank settlement system and RTGS was the result of these efforts.
Real Time Gross Settlement (RTGS) is a System for settling
inter-bank transactions on transaction by transaction (i.e., gross) basis, in an
online at real time mode. Trial run of the RTGS System was held for about two
months with the participation of four banks. During this period, as a measure of
abundant caution, the RTGS system, the policies, procedures, security and other
aspects were also subjected to a review by an external group of experts.
Details of the RTGS is
available here.
With the enabling of the Real
Time Gross Settlement (RTGS) amongst member institutions, around 3000 branches
of Banks in India are now expected to be capable of transfer of funds
electronically. Initially the transfers may be restricted to Inter Bank
transactions and later extended to customer transactions.
The RTGS system will function
on a special message transfer platform and will comprise of the Inter Bank Fund
Transfer Processor (ITFP) and the Participant Interface (PI) PI interacts with
the ITFP through the INFINET (Indian Financial Network) with a digitally signed
and encrypted message with PKI based digital certificates issued by IDRBT.
There will be different types
of membership to the RTGS and each of the types will be required to use
appropriate interface applications as specified by RBI. The members will include
Banks as well as Call Money Operators and will be provided with Intra-day
Liquidity support where required. RBI will both be a service provider and also a
participant as a Category A member along with other scheduled Banks. Category A
and B members will maintain accounts with RBI integrated with the system
enabling RBI to use the funds for settlement purpose.
An effective utilization of the
facility of instant fund transfer across branches of Banks will go a long way in
improving the profitability of Banks in the competitive scenario. It also poses
reasonably tough challenges in Cyber Law and Regulation Compliance, failure of
which may result in the membership of the Bank being cancelled.
It can therefore be stated that
the introduction of RTGS has ushered in a new era of Digital Procession of Inter
Bank Payment settlement which will have lasting impact on the system.
Na.Vijayashankar
March 28, 2004
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