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How RTGS works , maintained by RBI

The RTGS system process flow

The RTGS business day starts at 09:00. Customer and interbank transactions can take place from the start of the day to 16:30 and 18:00 respectively on weekdays and to 13:30 and 15:00 respectively on Saturdays. The IDL facility is available during these business hours. A payment instruction is sent by a member through its PI, and is validated and acknowledged by the IFTP. It is then forwarded by the IFTP to the RTGS, which maintains the settlement accounts of the participants where the funds transfer actually takes place. In the RTGS, the availability of funds in the settlement account is checked, the funds are transferred (settlement takes place) provided balances are sufficient, and a message is sent to the IFTP for onward transmission to the beneficiary bank. If sufficient funds are not available in the settlement account of the paying bank, the payment instruction is put in a queue that is processed on a first in, first out (FIFO) basis. Payment instructions can be assigned a priority by members (who can change these priorities until settlement). Instructions with a higher priority are processed first, while FIFO is applied to payment instructions with the same priority. When a payment instruction is found pending in the queue, a message is sent to the SSS asking for the availability of eligible securities in the member’s IDL-SGL account, for triggering IDL. If securities are available, the SSS uses them as collateral and a confirmation is sent to the RTGS system, where the necessary funds are made available and the payment is processed. When securities are not available, the SSS sends a message to the RTGS system and the payment instruction is put back into the queue. At pre-scheduled intervals, the IDL reversal is activated to check for outstanding IDL utilised by members. If sufficient balances are available in a member’s settlement account, the funds are utilised to reverse the IDL and a message is sent to the SSS to release the securities held as collateral into the member’s IDL-SGL account. These securities then become available for other uses. Half an hour before the close of the RTGS business day, new IDL provision to members stops and members must return all outstanding IDL by the end of the day.

Transaction processing environment

The RTGS system operated and managed by the RBI uses a Y-shaped message flow structure. Members connect to the system through INFINET and use the participant interface (PI) to communicate with the interbank funds transfer processor (IFTP), which validates all communications. When a transaction is successfully completed and this is confirmed by the RTGS system, the IFTP forwards the credit information to the beneficiary member’s PI. All communications between the PI and the IFTP are encrypted and use digital signatures (under public key infrastructure).

Settlement procedure and liquidity support

To settle transactions submitted to the RTGS system, members must maintain an RTGS settlement account with the RBI in Mumbai. This account has to be funded at the beginning of each RTGS processing day from the member’s current account with the RBI, and at the end of the day the balance in the settlement account is transferred back to that current account. Since banks maintain current accounts with different offices of the RBI, they are allowed to transfer funds during the RTGS day between these current accounts and the RTGS settlement account. For this purpose, there is an interface between the RTGS system and the Integrated Accounting System (IAS) of the RBI. The IAS is the accounting system of the RBI (members’ current accounts are in IAS). The banks use the option available in their Participant Interface (PI) (to transfer funds from one account to another in Mumbai) or use the centralised funds management system (CFMS) if the transfer is between accounts from one office of the RBI to another. Transactions which have passed all validity checks are taken up for settlement on a FIFO with priority basis. All such transactions based on available balances in the settlement account are duly settled by debiting the account of the sending bank and crediting the account of the receiving bank. Settlement finality on a gross basis in real time is achieved when this process is complete. Members can obtain intraday liquidity (IDL) from the RBI (fully collateralised by Indian government securities held by the members in their IDL-SGL account) free of interest to augment their available liquidity in the RTGS system. IDL must be returned by the end of the RTGS day. Failure to do so is subject to a penalty interest charge on outstanding balances.

Please see below table for approx timings and cycles of the different clearing and settlement systems works in India.

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