HDFC Bank, Saraswat strike first RTGS deal

The first real time gross settlement (RTGS)-based deal was struck yesterday between HDFC Bank and Saraswat Bank for Rs 110 crore.

This is a major achievement for the Indian banking industry as in a matter of seconds, funds flowed from HDFC Bank to the co-operative bank, which otherwise would have taken at least two days.

"RTGS will facilitate receivable management," said HDFC Bank country head corporate banking Samir Bhatia.

HDFC Bank and Saraswat Bank are two of the four banks selected by the Reserve Bank of India for the initial pilot RTGS scheme. The other two banks are State Bank of India (SBI) and Standard Chartered Bank.

Initially the RTGS transactions will be inter-bank related among the RTGS members. The first transaction that took place yesterday was a bill rediscounting scheme, said Bhatia.

HDFC Bank undertakes the maximum number of electronic fund transfers, amounting to Rs 3,000 crore per month.

Industry sources further stated that the second highest number of electronic fund transactions is by Deutsche Bank through its DB Direct product, followed by HSBC.

Once the entire process is streamlined between participating banks, the central bank will enable customer-related transfers. A number of prime and medium-sized corporates are keen to put some of their receivables into the pilot RTGS project, said Bhatia.

"Corporates will be able to collect and disburse funds much faster than the current physical fund transfer mechanism, thereby facilitate in reconciliation of statement of accounts," he added.

The bank has initially selected 20 top corporates across four regions to start with.

"Eventually all players will move to the seamless movement of funds from one end to another using the IT platform. The idea is to reduce the systematic risks in the settlement system," said senior bankers.

The central bank has classified four different membership classes: schedule and commercial banks as type A; primary dealers as type B; type C class of members are participant banks using type A members as their settlement banks; and type D will consist of clearing houses like National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL).

Type B and C members are expected to join the system in phases about a fortnight hence. All RTGS participants are likely to be part of the system in the next three months.

At that point of time, it will be possible to identify the actual savings banks can achieve through the use of RTGS. The RBI has decided to start operations in Mumbai initially before moving onto other clearing zones.