Once a transaction has been approved, settlement is the second and final step. This occurs when the issuing bank transfers funds from the cardholder's account to the payment processor, who then transfers the money to the acquiring bank. The company will then receive the authorized funds in its merchant account. RTGS is a fund transfer system in which the transfer of money is carried out from one bank to another in real time and in gross figures.
Real-time settlement means that the payment transaction is not subject to any waiting period. Gross settlement means that the transaction is settled individually without bundling it or offsetting it with any other transaction. Once processed, payments are final and irrevocable. This was introduced in 2004 and settles all interbank payments and customer transactions above 2 lakh.