‘Many takers’ for speedy fund transfer

Left : M G Sudhir Kini

THE National Exchange, managed by Syndicate Bank, has reported an over six-fold growth in electronic remittances, barely five months after it began full-scale fund transfer through the Real Time Gross Settlement (RTGS) system to several Indian banks and their branches.
The exchange house, which has roped in IDBI Bank for the latter’s network to the Indian Reserve Bank’s RTGS system, said the service is catching on even with the non-affluent.
The RTGS advantage is that a client no longer has to wait a week or more wondering if the instrument has safely reached its destination and was duly encashed.
“From what we were when started on a pilot basis till now, there is a six-fold growth and it is a good start to begin with for a product,” National Exchange General Manager M G Sudhir Kini told Gulf Times.
The exchange undertakes an average 30-35 transactions daily through the RTGS mode.
RTGS is a centralised system in which inter-bank payment instructions are settled in ‘real time’.
Each payment is settled individually on a transaction-by-transaction basis instead of linking each payment with the others that are settled through the netting process.
Currently, bank officials meet at a clearing house to exchange cheques and other instruments drawn on one another.
Banks pay for those instruments that have been issued by their customers and also receive money for instruments presented to other banks by their customers.
This is time consuming and results in customers having to wait longer to clear instruments and get their money credited into their account.
“As of now, remittances through Real Time Gross Settlement System constitute 7-8% of the total fast remittances,” Kini said.
He added the exchange house has been able to attract 20-30% new clients, of which a sizeable number earlier used to remit money through multinational banks.
The money is being remitted to banks in India like ICICI, HSBC, Citibank and HDFC.
The National Exchange, which championed such a concept in Qatar, has been electronically transferring funds to Syndicate Bank, Federal Bank and Punjab National Bank rather on a bilateral basis.
Its fast remittances to the four banks, with which it has tie up, comprise about 40% of its total business.
This is for the first time the exchange house has taken such an initiative to enable fund transfer to almost 28,000 branches in India.
However, Kini acknowledged that there was some initial reluctance on the part of customers to the RTGS mode.
But going by the response, it (remittance through RTGS system) is expected to play a bigger role in the coming years because more branches and banks will be covered under Real Time Gross Settlement System, he said.
Fund transfer through Real Time Gross Settlement System is foolproof as the system provides for a separate transaction which can be used to transmit the customer information along with the payment message to the beneficiary’s bank in a structured format, thus ensuring security.
The payment transactions emanating from a participant are ordinarily expected to be settled within two hours after it is received by the beneficiary bank, which is the essence of the real time system, he said.
The Real Time Gross Settlement System seeks to reduce the systemic risk that exists in the present settlement systems like cascading affect on banks due to failure of one bank to meet its settlement commitments.
Indian banks are putting in place necessary infrastructure to keep pace with fast changes globally especially in view of the fierce competition from international players.