Real Time Gross Settlement (RTGS) is a specialist funds transfer system where the transfer of money or securities takes place from one bank to another on a “real-time” and a “gross” basis.
Real time means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed. In Kenya, most banks complete transfers within 3 hours.
Gross settlement means the transaction is settled on a one-to-one basis, without bundling or netting with any other transaction such as debits against credits.
This ensures that the funds are available to the recipient without delay and the risk associated with deferred net settlement systems.
Each country that supports this technology has its own RTGS system. The Kenya Electronic Payment and Settlement System (KEPSS) is the RTGS system used in Kenya, operated by the Central Bank of Kenya.
Benefits of an RTGS system:
- Real-time funds transfer
- Risk control mechanism
- Permits on-line real-time query of the funds’ position
- Finality of funds settlement
- Simple payments process
- Optimization of liquidityLiquidity refers to the ease with which assets can be converted into cash without significantly affecting their market price. This concept is crucial ... ...
- Efficient funds management
- Allows for large value transfers between banks
- Enables fund movement between cities
In Kenya, RTGS transactions through KEPSS are typically completed within a few hours, although the settlement is immediate. This makes it a convenient way to transfer money from one Kenyan bank account to another for high-value, time-critical transactions.