The Reserve Bank of India has postponed the launch of real time gross settlement (RTGS). According to dealers, RTGS was scheduled for soft launch by January end of January with a few banks participating.

However, it had to be deferred as some banks were not yet equipped with the infrastructure for it.

Sources said the RBI is also yet to come out with guidelines for RTGS.

A banker said the soft launch would have helped Mint Road to arrive at the guidelines framework as problems could have been identified easily.

Earlier, a pilot run for RTGS was conducted with four banks participating -- State Bank of India, HDFC Bank, ABN Amro and Saraswat Bank.

The soft launch plan was decided upon after this. In addition to the four banks, others who would have joined the soft launch were the Central Bank of India, Punjab National Bank , Union Bank of India, ICICI Bank, Dena Bank, Standard Chartered and Deutsche Bank.

Earlier, market participants had suggested that the RBI could open an intra-day repo window for banks to avail of liquidity to meet any shortfall in real-time settlement of high-value accounts.

RTGS is expected to bring about a paradigm shift in all settlement systems among banks. Being an on-line framework, it is expected to spawn liquidity mismatches as many banks may not have the liquidity to meet the requirements. The problem could have aggravated for banks with small capital base and who are net borrowers of funds.

As for the proposed scheme, the facility could be used by banks only through the exchange of government securities portfolio whereby each bank will earmark, on a daily basis, the relatively illiquid government securities and keep them aside for this facility.

This facility will be over and above the usual interbank money market operations and liquidity adjustment facilities.

Therefore, banks will have to set aside both the liquid securities for trading purposes and illiquid ones for drawing refinance.

Primary dealers were also allowed as RTGS members -- but for proprietary settlement only and not trading settlement.

Earlier, the RBI was not in favour of allowing primary dealers to be a part of it. However, PDs had made a representation saying they account for a major part of the traded turnover in gilts.