The introduction of real time gross settlement (RTGS) can improve the country's rating. | RTGS, which essentially means that money will move from one account to another on a real-time basis, can help modify a country's rating as it increases the confidence in trade, said RTGS functional authority Jo Spencer, who incidentally is the architect who worked with the Reserve Bank of India (RBI) towards the introduction of RTGS in India. |
| India moves towards RTGS in the third week of January. RTGS will help reduce settlement and systematic risk, especially in the case of high value payment, said Spencer, who works with Logica Global Solutions Pvt Ltd, which has been instrumental in introducing RTGS in 18 countries. |
| "There will be a dramatic improvement in how money moves around in the system, reducing risks for businesses and creating efficiencies as it frees up capital. This creation of financial stability and transparency making it comfortable for more foreign direct investment (FDI) to come to India," said ABN Amro Working Capital Group managing director John Gibbons. |
| While RBI deputy governor K J Udeshi said public banks are preparing for RTGS, Spencer is more skeptical, as he told Business Standard: "Public sector banks have the most to gain and most to lose." |
| Today, a lot of banks make money on the float capital in the system. With the introduction of RTGS, public sector banks could lose a lot of business, as they can no longer "fatten up on inefficiencies", said Gibbons. |
| Private and foreign banks, on the other hand, stand to gain tremendously as they capitalise on their technology edge. Gibbons cited the example of Brazil, where ABN Amro saw business grow in terms of cash flows by over 100 per cent in 2002-03 for a variety of reasons including the ability to take advantage of RTGS. |
| With RTGS, corporates will be able to settle their finances on a real-time basis, provided that banks can offer last mile connectivity in terms of connecting all their branches to a centralised system. |
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