merits and demerits of RTGS
Answers
Explanation:
Advantages of RTGS
- RTGS is one of the safest as well as the fastest mode of interbank transfer
- This facility is available on all business days, whose timings may vary from bank to bank.
- It is an immediate fund transfer mechanism.
- It is a paperless transfer of funds.
- The beneficiary is not required to visit the bank, to deposit the money.
- The funds can be transferred using the internet banking service.
Limitations of RTGS
RTGS does not provide the facility to track the transaction to its customers, as only the positive confirmation feature is implemented by the central bank in which the remitting bank gets a message of fund transfer to the beneficiary bank, from the central bank.
In general, the beneficiary branches may receive funds in real-time, i.e. as and when the funds are sent by the remitting bank. The beneficiary bank has to credit the fund in the account of the beneficiary, within half an hour of the funds’ transfer message.
However, if the funds are not transferred to the beneficiary’s account due to the reasons like account frozen, or non-existence of account, then the funds are returned to the originating bank. Moreover, if there is a delay in refunding the failed amount, the initiating party is entitled to receive compensation at the current repo rate + 2%
Explanation:
Merits of RTGS:
- The fund transfer occurs in real time.
- The transfer can occur online.
- RTGS is predominantly used for high-value transactions.
- The system is highly reliable and is powered by the RBI.
- It offers immediate clearing.
- The process follows a one-to-one basis for crediting the funds.
Demerits of RTGS:
RTGS may be defined as the continuous process that settles the individual payments without any netting debits. RTGS settlement is mainly employed for the large value and the transfer of the inter fund banks. The main disadvantage of RTGS is that the gross system has the gridlock risk that do not have enough money.
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