Real-Time Gross Settlement (RTGS)

Is a funds Transfer system which allows for to transmit funds instantly on a gross basis. Instant transfer means that Transfer is executed as soon as it is processed. Gross basis in this context refers to the notion that it is not bundled with other Transfers and is settled on a one-to-one basis. RTGS is usually employed to settle high-value transactions that require immediate Clearing. Such Transfers usually bear higher costs and usually are operated by Central Banks within boundaries of one country.

How does Real-Time Gross Settlement work?

RTGS usually do not involve any physical transfer of funds, but rather are settled whilst Central Bank reduces funds on the account of Originating Financial Institution and adds them on the account of Receiving Financial Institution. Hence, in order for RTGS to operate both Financial Institutions involved in the Transaction must hold accounts with the Central Bank. 

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