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The Full Form of RTGS is a Real-Time Gross Settlement. RTGS systems are specialised financial infrastructures used for the immediate and individual transfer of funds or securities between banks. Moreover, this article explores the concept of RTGS, its history, operation, and significance in the global financial system.
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What is the Historical Development of RTGS Systems?
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The evolution of RTGS systems began with the US Fedwire system in 1970. Furthermore, this was followed by the development of similar systems in the United Kingdom (CHAPS) and France (SAGITTAIRE) in 1984. Over the years, many countries launched RTGS systems tailored to their specific needs. By the year 1997, several countries had introduced RTGS systems to facilitate large-value fund transfers.
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What is the Operation of RTGS Systems?
RTGS systems are typically operated by a country’s central bank due to their essential role in a nation’s economy. These systems facilitate efficient payment processing, reducing the cost of goods and services exchange and supporting interbank, money, and capital markets. Thus, an efficient payment system is vital for economic stability and development.
In RTGS, transactions do not involve physical money exchange. Instead, the central bank adjusts the electronic account balances of participating banks in real-time. Additionally, this system is ideal for low-volume, high-value transactions, hence eliminating settlement risk and providing an accurate account balance at any time. Moreover, transactions settled through RTGS are immediate, final, and irrevocable, thus minimizing credit risks associated with settlement delays. Many RTGS systems cover a significant portion of high-value transactions within the national monetary market.
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What is the Significance and Adoption of RTGS?
Central banks worldwide adopt RTGS systems for various reasons. They face competitive pressure from global financial markets and benefit from broader access to other countries’ RTGS systems. In addition, sharing experiences and knowledge among central banks contributes to informed adoption decisions. Moreover, central banks can collaborate with providers experienced in RTGS system development, reducing implementation costs.
The World Bank supports payment system development as a vital component of a country’s financial infrastructure, offering assistance to over 100 countries. Most RTGS systems adhere to international standards and best practices, ensuring security and reliability.
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