RTGS Full Form
RTGS Full Form-What is RTGS? RTGS is the continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank.
RTGS Full Form
|Real Time Gross Settlement|
FAQs About RTGS:
RTGS is the continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank.Under the RTGS system, it is entirely possible to settle two orders with the same amount, which is possible because the two debits from your bank account are not aggregated to make it possible to offset these same debits.
RTGS is required because central banks can only issue fiat currency. Digital fiat currencies in countries with stable macroeconomic and financial environment will suffice. RTGS allows the central bank to deal with 'thin' markets. In physical currency trading, one could hardly trade from one central counterparty to another due to large transaction costs. RTGS eliminates this costly transactions. Also, this allows central banks to clear transactions without issuing physical currency. The use of RTGS allows the central bank to reach out to the public without taking the risk of holding fiat currency in custody and people's ready cash to buy the currency. So, in order to drive the demand for digital currencies, its adoption should happen in the same framework.
Central banks carry balances and transactions across the money market, so they cannot actually make real time payment to a person. To work around this, a central bank will undertake a daily auction or an auction-cycle of transfers across their banking system in order to make the transfer from one bank account to another. The net effect is that the payment in question is paid across the banks; not across individual accounts.
In an RTGS system, all payments at the central bank are in black and white, unless the orders do not match the reported net positions. The transactions can be done in real time, the transactions can be settled and reversed at will without delays or the delays associated with day traders or the layered risk of a single location.
If a payment system is built on the RTGS structure, all of the payments must flow through a central bank. This means that the central bank is in the role of the banker to the world. This is not the case with credit, which flows from the payer to the payee directly. It is precisely this centralization of banking that provides us with the potential for the manipulation of the whole currency system. Banks can increase the stock of money if they know that the system will store the new money in the bank's vault, which would then create more deposits. In fact, most new money in the system originates in the treasury, which does not create new deposits but simply pays for existing ones. The other commonality between RTGS and credit is that both do not allocate new money directly to anyone.