Real-time payment settlement goes live

After several missed deadlines, Bangladesh Bank's real-time gross settlement system (RTGS) finally went live yesterday, a move that would radically speed up the money transfer.

From now, a cheque worth Tk 1 lakh or more will be cleared within a minute as opposed to a day under the previous system.

Fund transfers between banks will also be done instantly through the system.

"Now, we can proudly compare our payment and settlement system to others around the globe," said BB Governor Atiur Rahman at the launch of RTGS.

Save for the Rajshahi Krishi Unnayan Bank, all other banks have joined the RTGS network.

The RTGS is a specialist fund transfer system where the transfer of money takes place from one bank to another on a "real time" and on "gross" basis.

Settlement in "real time" means payment transaction is not subjected to any waiting period; the transactions are settled as soon as they are processed.

Gross settlement means the transaction is settled on a one-to-one basis without bundling or netting with any other transaction. Once processed, the payments are final and irrevocable.

The system was initially set to go live in July, but the deadline was pushed to October 8 only for it to be revised to October 22.

The system will have a substantial positive impact on banks' operations, particularly in areas of treasury, payment, corporate banking and cash management, Rahman said.

Rahman hopes the new payments settlement system will boost the country's ailing secondary bond market.

Trading in intra-day liquidity and efficient fund transfer will provide a boost to the secondary bond market, which, in turn, offers opportunity to earn revenue, he said.

The RTGS will also help non-resident Bangladeshis and foreign investors to remit, transfer and invest funds in the country.

As of now, 5,000 branches out of 9,000 of 55 banks have come under the system.

"Banks will benefit the most with the RTGS," said Kazi Saifuddin Munir, managing director of IT Consultants Limited (ITCL) that owns the Q-Cash payment processing consortium.

Previously, banks had faced difficulty in settling their payments with other banks and the BB at the end of the day.

It took an additional day to settle the payments, but now it would be done in real time, he said.

Rahman, however, warned the banks about the risks associated with the new system.

"We need to be aware that this technological advancement not only ensures the best of our payment activities but will also introduce a few risks."

He said banks will need to implement new strategies, processes, systems and organisational capacity for successful implementation of the RTGS.

On the pricing of the transaction through RTGS, the BB is yet to make the issue clear.