Understanding RTGS: A transfer solution for large Interbank transactions

What is RTGS?

Real-Time Gross Settlement (RTGS) is an electronic funds transfer system where each transaction is processed and settled instantly (real-time) and individually (gross settlement). RTGS is typically used by banks, large corporations or financial institutions for interbank transfers.

In an RTGS system, each transaction is processed directly without waiting for batch processing or consolidation with other transactions. Due to its fast and direct processing, RTGS is often used for high-value transactions that need to be settled immediately.

RTGS transactions are processed via a highly secure and encrypted system. The settlement of RTGS transactions is final, irrevocable and guaranteed, ensuring payment security.

In Indonesia, RTGS is administered by Bank Indonesia and is commonly referred to as BI-RTGS. BI-RTGS facilitates inter-bank transfers through Bank Indonesia's real-time gross settlement system at the national level.

RTGS transactions usually take a few hours during banking opening hours. However, transactions made after 3 p.m. cannot be processed until the next day. Similarly, transactions at the end of the month may be delayed by one day due to the bank’s closure processes.

Minimum transfer limit for RTGS

Bank Indonesia has set the minimum transfer limit for RTGS at Rp100,000,001 (one hundred million and one rupiah). As RTGS is generally used for high-value transactions, transfers below this limit will be routed to alternative services such as instant transfer systems like BI-FAST and SKNBI (Indonesia’s national clearing system).

RTGS transfer fees

The cost of RTGS transfers depends on the policy of each bank. However, Bank Indonesia regulates the amount of fees for RTGS transactions, which are usually between Rp25,000 and Rp50,000 per transaction. Fees may be higher for cross-border services or foreign currency transactions.

Advantages of RTGS for business transactions

As a fast and direct remittance system, RTGS is an ideal solution for high-value business transactions. Here are some of the key benefits of RTGS:

1. Suitable for large transactions

One of the main benefits of RTGS is its ability to handle transactions of significant value. Unlike standard interbank transfers, which have maximum transfer limits, RTGS is specifically designed to facilitate the transfer of large amounts, typically over Rp100 million.

This makes RTGS an excellent choice for various high-value business transactions, such as:

• Intercompany payments, such as payments to suppliers for large procurements or payments for construction projects.
• Capital market transactions, such as processing the purchase or sale of shares or bonds with high nominal values.
• Financial obligations, such as the repayment of loans or the settlement of substantial debts.

2. Secure transaction processing

RTGS offers a high level of security as it operates under the strict supervision of a financial regulator, such as Bank Indonesia. The system uses encryption of transaction data to prevent unauthorized access and ensure the confidentiality of information.

In addition, transactions go through strict review and approval procedures at both the sending and receiving banks to minimize the risk of fraud or error. This strengthens trust in transactions between companies and financial institutions.

3. Guaranteed transaction processing

A key feature of RTGS is its finality — the certainty that once an RTGS transaction has been processed, the funds will be transferred directly to the recipient’s account and the transaction cannot be reversed.

This ensures a high level of reliability and security for businesses, as recipients can receive payments immediately. It minimizes the risk of payment defaults or unilateral transaction cancelations and gives businesses more security in their financial planning due to the guaranteed timing and amount of payments.

4. Cross-border transactions

RTGS supports multi-currency transactions and enables cross-border money transfers with corresponding currency conversions. This speeds up international payment transactions, shortens waiting times and reduces costs. With fast settlement processes, businesses can also minimize the impact of exchange rate fluctuations.

How RTGS works

RTGS works by processing and settling transactions directly, quickly and individually, without bundling them with other transactions. Here you will find a detailed explanation of how the RTGS system processes money transfers:

1. Transaction initiation by the customer

First, the customer initiates the transaction by transferring money via the RTGS system. The customer can visit a bank branch in person or use online banking to make an RTGS transfer.

During the transfer process, the customer must provide the following details:

• The name and account number of the beneficiary.
• The amount to be transferred.
• Name of the recipient’s bank.

2. Validation and authorization by the sending bank

After the customer has initiated the transfer, the sending bank validates and authorizes the transaction. The bank ensures the legality of the transaction instructions, for example by checking the availability of funds in the account and the accuracy of the recipient's details. Once the transaction data has been validated, the sending bank releases the transaction for further processing.

3. Transmission of the instruction to the RTGS system

Once the authorization is completed, the sending bank forwards the transfer instructions to the RTGS system operated by Bank Indonesia. The RTGS system processes the instructions and validates the data from the sending bank.

4. Settlement in the RTGS system

The RTGS system settles the transaction by transferring the amount directly from the sending bank’s account to the receiving bank’s account. The recipient bank validates the transaction and credits the amount to the recipient’s account. This settlement is final and irrevocable.

5. Transaction confirmation

After the RTGS system has completed the transfer, both the sending and the receiving bank receive a transaction confirmation. The account balances of the sending and receiving banks are updated in real time to reflect the successful transaction.

More efficient transaction management with Aspire

From the above, you now understand that RTGS transfers offer numerous advantages and are ideal for large business transactions. Regardless of which transaction system you use, it is important to manage your business transactions effectively and efficiently. One way to achieve this is to use Aspire’s Business Accounts.

With Aspire Business Accounts, you can make interbank transfers with just a few clicks from a single dashboard. Simply enter the transfer amount and Aspire will automatically select the best transfer method, including the National Clearing System (SKN), RTGS, Real-Time Online (RTO) or BI Fast. You can also take advantage of up to 10 free local transfers per month.

In addition, Aspire Business Accounts allows you to make international online payments with just a few clicks at competitive rates and exchange rates.

Aspire offers numerous other outstanding features, such as Payout API, expense management and corporate cards. Want to learn more? Contact our team today!