New national payment system provides major boost to Bahrain's economy

Funds transfers are taking placing instantly, utilizing the Real Time Gross Settlement (RTGS), an online, real-time and secure system now being used by Bahrain's retail banks for electronic payments made on account of their customers or on their own account.

The CBB RTGS system began phased operations in June 2007, becoming fully operational on 9 August 2007. The system facilitates two types of payments:
• Customer fund transfers: Customers, whether individuals or corporates, can utilize the RTGS to remit funds for a variety of purposes, such as payment of bills, credit card payments, payroll transfers, and standing orders.
• Interbank fund transfers: Bank-to-bank payments, such as lending and borrowing between banks.

"The processing and settlement of such transactions takes place in real-time, online mode, with final and irrevocable intra-day settlement," said Mr. Ahmed Buhijji, Director, Banking Services, at the CBB.

"This means that anyone, whether an individual, a business organization or a bank itself, can make electronic payments to whomsoever they like, with the value of such payments received almost instantaneously, as against 2-4 days previously."

This is because the RTGS provides certainty of payment, enabling the receiving bank to credit the beneficiary's account immediately and allow full use of the funds. The CBB RTGS system processes and effects payments on transaction-by-transaction basis, from 8am to 1.40pm each working day, from Sunday to Thursday.

During August 2007, the CBB RTGS system handled transactions worth over BD4.6 billion (US$12.2 billion).

On a daily basis, the CBB RTGS system handled, during August 2007, over 900 funds transfer transactions worth BD211 million (US$561 million). In terms of number of transactions, Customer Payments represented nearly 70% (or about 623 transactions), with an average daily value of BD16 million (US$43 million). Interbank transactions, i.e. transactions which banks undertake on their own account, averaged about 290 per day, with a value of about BD195 million (US$518 million).

"The new national payment system has dramatically changed the pace of the movement of money within the national economy, enabling efficient and optimum utilization of financial resources,"

said Mr. Buhijji.

Effective payment and settlement systems, which provide a secure environment with minimal settlement and systemic risk, are essential to the functioning of a modern financial market such as Bahrain's.

Mr. Buhijji urged banks to encourage their customers to utilize the RTGS system, to enable even small retail customers to enjoy the benefits of the new national payment system.

"The RTGS mode of funds transfer is available to all customers, however small their transaction, through their preferred retail bank," he said.

"For the business community, time is money, and utilization of the RTGS system can make a profound impact on how they do business and how they manage their cash flows."

The CBB is committed to ensuring the advancement of Bahrain as an international financial centre, in general, and the efficient functioning of the country's financial markets, in particular, noted Mr. Buhijji.