Conceptually, the Real Time Gross Settlement (RTGS) is a highly developed technology that makes possible fund transfers between banks on real time basis, for both local and approved foreign currency transactions. This is the fastest money transfer system through the banking channel and considered a secured method for settlement of inter-bank transactions. In this system participating banks are able to transfer funds on a 'real time' and 'gross' basis. Settlement in 'real time' means payment transaction is not subjected to any waiting period or the transactions are settled as soon as they are processed. 'Gross Settlement' means the transaction is booked in the central bank's account on one-to-one basis without netting with any other transactions. Once processed, payments are immediate, final and irrevocable. RTGS systems are typically processed for high value electronic transactions that require immediate clearing.
Recently, the Bangladesh Bank launched the Real Time Gross Settlement (RTGS) system aimed at facilitating business activities across the country. The BD-RTGS has been a great success for the banking sector and should also be treated as a milestone in achieving the dream of digital Bangladesh of the incumbent government. The system has been developed with the financial assistance of Asian Development Bank (ADB) under the project entitled "Institutional Support for Migrant Worker's Remittances- Real Time Gross Settlement (RTGS)".
The BD-RTGS is the inter-bank large value payment system which accommodates local and approved foreign currency payments initiated by originating banks on their own behalf and on behalf of their customers. The minimum amount for an RTGS payment is Tk100,000.00. However, there is no minimum limit for foreign currency payments and the Bangladesh Bank may choose to relax this limit for specific local currency payments (like tax, vat and customs duty) as well. There is no maximum limit for the amounts that may be transferred through BD-RTGS except the system's acceptable field limit.
The system processes payments in the following six currencies:
1. Bangladesh Taka (BDT)
2. British Pound (GBP)
3. Canadian Dollar (CAD)
4. Euro (EUR)
5. Japanese Yen (JPY) and
6. United States Dollar (USD)
Basically, the BD-RTGS system is the central processing and settlement facility operated by the Bangladesh Bank. In this system the originating banks receive payment instructions from its customer and forward the instruction to the BD-RTGS system. The system receives instructions from originating banks, and before issuing instructions to the appropriate receiving bank, it does the settlement job. Subsequently the receiving banks receive RTGS payment instructions from BD-RTGS system and post the same to the appropriate account.
It is expected to help boost 'business to business' transactions, along with other general transactions by enabling instant settlement of high value local currency transactions, as well as government securities and approved foreign currency-based transactions.
An efficient payment system reduces the cost of exchanging services and is indispensable for smooth functioning of the inter-bank money and capital markets. The BD-RTGS system is a great initiative to ensure an efficient payment system in the banking industry. The system will definitely have a substantial impact on current operations in the banks, particularly in the area of treasury, payment division, corporate banking and cash management.
The writer is an officer of Islami Bank Bangladesh Ltd.,
Munshiganj Branch.
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