The document describes a real-time gross settlement (RTGS) system that allows for the instant transfer of large value payments between banks on an individual basis without being bundled with other transactions. An RTGS system provides advantages like real-time payment settlement that reduces credit and settlement risks, but it also requires more liquidity from banks to ensure cash is available for each individual payment.

2. System where
transfer of money
from one bank to
another on “real
time” and “gross”
basis.
“Real time” :
payment transaction
is not subjected to
any waiting period.
“Gross settlement:
:transaction settled
from one to one
basis w/out bunch
with other
transaction.

3. To transfer
money
between
banks in large
value
payments
For banks:
to withdraw
cash from
their deposit
acc. with BNM
To make
adjustment to
the reserve
requirements
that the banks
must hold
with BNM
To settle
money market
transactions

4. ADVANTAGES
• Real time payment settlement :
> As soon as they accepted by
the system
• No credit risk:
> No settlement risk as it settle
instantly.
• Benefits to economy:
> Instant finality of payments
ensure fast and secure
settlement.
DISADVANTAGES
• Requires more liquidity than
the settlement systems:
> Cash must available for each
individual payment