Page 124 - DMGT303_BANKING_AND_INSURANCE

Unit 6: New Age Clearing and New Age Payment

Notes

Notes No minimum or maximum stipulation has been fixed for EFT and NEFT transactions.

Advantage for Companies

Apart from cutting down on paper work, big companies are expected to save over Rs. 2,000 per
Rs. 1 crore worth of transactions using RTGS. It reduces the risk of country party default and
boosts investor confidence, apart from helping companies manage their working capital
requirements more effectively. In short, it allows companies to collect funds from customers
and move money to and from plant site faster, thereby helping the bottom-line.

Advantage for Investors

The RTGS network, with its main hub at the Reserve Bank of India headquarters in Mumbai, will
enable settlement of stock market deals the next day, instead of the current two days, which, it
is hoped, will boost trading volumes. The decision to implement RTGS promoted the largest
pension fund in US, Calpers to add India as an investment decision in April '04.

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Caution Apart from cutting down on paper work, big companies are expected to save over
Rs. 2,000 per Rs. 1 crore worth of transactions using RTGS.

Did u know? The RTGS network, has its main hub at the Reserve Bank of India headquarters
in Mumbai.

Self Assessment

Fill in the blanks:

1. The ........................................ bank receives a message from the Reserve Bank that money
has been credited to the receiving bank.

2. The ...................................... system is primarily for large value transactions.
3. ................................................. are electronic fund transfer modes that operate on a deferred
net settlement (DNS) basis which settles transactions in batches.

4. Once the ........................................ are credited to the account of the beneficiary bank, the
remitting customer gets a confirmation from his bank either by an e-mail or by a short
message on the mobile.
5. The acronym "RTGS" stands for ............................................................

6.3 RTGS Operations-impact on the Financial Sector

The RTGS system has brought about some significant benefits to the Indian financial system.
Apart from enhancing the stability of the financial system, it has improved the efficiency of the
system in terms of efficient cash management by banks, immediate transfer to the customer's
account and reduction in transactions cost.

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