Bangladesh Bank is set to introduce the real-time gross settlement (RTGS) system on October 8 to facilitate instant settlements of payments online.

RTGS is a system of transferring money or securities from one bank to another on a real-time or 'gross' basis. It is part of a project jointly funded by the government and the Asian Development Bank.

Real-time settlement means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. Gross settlement means the transaction is settled on a one-to-one basis without bundling or netting with any other transaction.

It enables the instant settlement of high-value, local currency transactions as well as government securities and foreign currency-based transactions, the BB said in a statement yesterday.

Under the present system, such transactions sometimes take more than a day to come through.

“All scheduled banks are required to take preparation to perform live transactions over the BB-RTGS system,” the BB said.

The RTGS will use MX (ISO 20022) message format for data exchange between central bank's systems and participating bank's systems through the existing virtual private network.  “The SWIFT network may be included as a redundant communication channel in the next phase.” 

The BB has also directed banks to complete installation of necessary hardware and software to introduce RTGS by August 17.

In line with the timeframe, participating banks will prepare their implementation plan and submit to the central bank by April 23.