When does settlement finality take place in RTGS systems?

Settlement finality in Real-Time Gross Settlement (RTGS) systems occurs at the time a payment is made. This means that once a payment instruction is processed, the transaction is settled immediately and irrevocably. As such, the funds are transferred from the payer's account to the payee's account in real time, ensuring that the transaction is complete and cannot be reversed.

RTGS systems are designed to minimize risk by settling payments individually in real time, which contrasts with net settlement systems where payments are accumulated and settled at the end of a certain period. This immediate settlement finality provides certainty for both the sender and receiver of the funds, enhancing the efficiency and reliability of the payment system.

In terms of the other options, settlement cannot take place before the payment is initiated, as there needs to be a transaction to settle. Settlement also does not occur after the payment is cleared because in RTGS, payment clearing and settlement occur simultaneously. Lastly, finality is not limited to the end of the business day, as RTGS systems facilitate continuous settlement throughout the day, enabling immediate confirmation of payment completion.