Reserve Bank Information and Transfer System (RBITS): RBI’s High-Value RTGS Infrastructure

Every time a bank transfers funds to another, settles a bond transaction, or clears a foreign exchange deal, something has to make that transfer final. In Australia, that something is RITS.

The Reserve Bank Information and Transfer System is what Australia's financial infrastructure lies on. It allows interbank transactions in real-time with the added benefit of security, certainty, and finality.

The system centers around the idea that unsettled obligations are a liability. The longer money is owed and not transferred, the more risk quietly accumulates in the background.

This article will cover  how RITS addresses that, how it works, its importance, and how it has evolved over the years.

RITS is a payment settlement platform in Australia that comes under the operations of the Reserve Bank of Australia. Using RITS, banks and approved institutions can settle their payment obligations in real time.

The purpose behind establishing RITS is to make sure that high-value interbank payments get settled safely and efficiently. And there’s no dangerous accumulation of unsettled obligations that could destabilize Australia's broader financial system.

The RBA acts as the ultimate settlement agent, and owns, operates, governs, and establishes rules related to participation in RITS.

RTGS is an electronic payment settlement method where every transaction is processed one at a time, instantly. The moment a transaction is submitted, the money moves and the payment is done.

Unlike net settlement, where banks keep a running tally of what they owe each other throughout the day, and only settle the difference at the end, RTGS transactions don’t wait. Every payment is settled in full, immediately, on its own.

What makes RTGS efficient for high-value payments is the complete elimination of waiting time. When large sums are involved, even a short delay creates risk. RTGS removes that entirely, so there’s no pile-up or uncertainty.

Here’s how the RITS system operates: 

Payment instruction process

• A bank submits a payment instruction to RITS, either directly or through an external feeder. system like SWIFT, Austraclear, or the New Payments Platform.
• RITS receives the instruction and immediately checks whether the paying bank has sufficient funds to proceed.

Settlement through Exchange Settlement Accounts

• Every participating bank holds an Exchange Settlement Account (ESA) at the Reserve Bank.
• When a payment is approved, RITS simultaneously debits the paying bank's ESA and credits the receiving bank's ESA.
• That single action completes the settlement, and it’s final and irreversible.

Real-time processing

• Each payment is tested and settled the moment it arrives.
• If a bank has sufficient funds, the transaction goes through instantly.
• If not, it joins a queue and is retested as funds become available, keeping the system moving efficiently throughout the day.

RITS allows participation to a large number of institutions, such as:

1. Authorized Deposit-taking Institutions (ADIs)

• The primary participants in RITS are ADIs, a category that includes Australian-licensed commercial banks and foreign bank branches operating locally.
• They are required to hold an ESA at the RBA and must be RITS members to access it.

2. Other ESA holders

• Beyond ADIs, other institutions approved by the RBA may also hold an ESA and participate in RITS.
• This includes systemically important central counterparties and licensed securities settlement facilities.

3. Non-ESA holders

• Some institutions join RITS without holding an ESA, typically batch administrators or eligible counterparties in the RBA's domestic market operations.

4. Financial market infrastructures

• Key financial market infrastructures connect to RITS as feeder systems or batch administrators.
• The Australian Securities Exchange (ASX) is a notable example. Its clearing and settlement arms submit batches of netted obligations from equity and property transactions directly to RITS for settlement.

ESAs are special accounts that banks and other approved institutions hold directly at the Reserve Bank of Australia. While mandatory for larger institutions that meet certain transaction thresholds, others may apply to hold one voluntarily.

They are essentially the banking system's version of a bank account, except instead of sitting at a commercial bank, they sit at the RBA itself. Crucially, these accounts must always remain in credit. Institutions cannot go into overdraft on their ESA.

Since RTGS settles each payment immediately and in full, there needs to be a reliable pot of funds to draw from at any given moment. ESAs serve exactly that purpose. They hold the funds that make real-time settlement possible. Without a funded ESA, an institution simply cannot participate in RTGS activity through RITS.

Every time a payment is settled through RITS, the paying institution's ESA is debited, and the receiving institution's ESA is credited simultaneously. This simultaneous movement is what makes the settlement final and irrevocable.

The RBA also pays interest on overnight ESA balances, giving institutions an incentive to manage their liquidity actively throughout the day rather than holding excess funds idle.

Sometimes, banks may not have enough funds in their ESA to cover every outgoing payment the moment it arrives. That's not unusual, and RITS is built to handle it through a set of practical liquidity management tools.

Intraday liquidity

• Banks need to have enough funds in their ESA at all times to cover outgoing payments as they arrive throughout the day.
• There are two main ways to top up liquidity: using overnight ESA balances carried over from the previous day, or borrowing funds from the RBA through its liquidity facilities.

Queue management

• When a bank doesn't have enough funds to settle a payment immediately, the transaction doesn't fail, it joins a central queue and waits.
• RITS then works through the queue continuously, retesting each payment as funds become available.
• To avoid gridlock, RITS also has an auto-offset feature. If two banks have payments sitting in the queue for each other, RITS automatically settles them simultaneously, freeing up liquidity for both.

Repo operations

• When a bank has to raise funds quickly, it can access the RBA's liquidity facilities by selling eligible securities like government bonds held in Austraclear to the RBA under a repurchase agreement.
• This way, the bank gets immediate ESA funds, and the RBA holds the securities temporarily as collateral.

Payment prioritization

• Banks can assign priority levels to their payments. That means moving critical transactions to the front of the queue.
• Institutions can also set sub-limits on their ESA funds. This usually includes ring-fencing a portion aside for high-priority payments while the rest handles general activity.

RITS is well known for handling high-value bank-to-bank transfers. In addition to that, it also supports debt securities, equity transactions, card payments, and the RBA's own monetary policy operations.

High-value interbank payments

The most fundamental function of RITS is settling large-value payments between banks. Things like overnight cash market transactions and cross-border Australian dollar payments routed through the SWIFT network.

Settlement for financial market transactions

RITS also handles the settlement of debt securities transactions through the Austraclear system and equity transactions through ASX Settlement. In both cases, RITS settles the cash leg of the transaction, the actual movement of funds between banks, once the securities side has been matched and confirmed.

Clearing system settlement

Lower-value obligations like those from direct entry, cheques, and card payments  are pooled and settled on a net basis through the Low Value Settlement Service (LVSS). Direct entry obligations are largely settled on the same day, while cheque and card obligations typically settle the following morning.

Support for monetary policy operations

RITS is also the channel through which the RBA conducts its domestic market operations, which is the day-to-day activity through which it manages liquidity in the banking system. When banks need to access the RBA's liquidity facilities, those transactions are executed and settled directly within RITS.

Given the volume and value of transactions that flow through it each day, RITS plays a central role in stabilizing Australia’s financial system. Its design addresses several crucial risks that can arise in large-value payment networks. 

Its importance can be gauged easily from the following points. 

1. Systemic risk reduction

Before RTGS was introduced in Australia in 1998, high-value payments accumulated throughout the day and settled later, creating a growing pile of unsettled obligations between banks. If one bank couldn't pay, others would follow. This domino effect is known as systemic risk.

RITS eliminates this by settling each payment the moment it is submitted, ensuring no dangerous build-up of obligations at any point during the day.

2. Settlement finality

Every transaction settled through RITS is final and irrevocable. Once the ESAs are debited and credited, the payment cannot be undone. This finality is legally protected under Australia's Payment Systems and Netting Act 1998, meaning even in the event of a bank insolvency, settled transactions on that day remain intact.

3. Central bank money settlement

All settlements in RITS occur in central bank money, which is the funds held directly at the RBA, rather than at a commercial bank. This is significant because central bank money carries no credit risk. There is no possibility of the settlement agent itself defaulting.

The Bank for International Settlements (BIS) itself recognizes settlement in central bank money as the gold standard for payment system safety, precisely because it removes the counterparty risk that commercial bank settlement would introduce. 

4. Payment system stability

Because RITS underpins so many other systems, from the NPP to Austraclear to ASX settlement, its reliability directly determines the stability of Australia's broader payments landscape. The RBA holds RITS to an annual availability target of 99.95 per cent, recognizing that even brief outages carry significant consequences for the institutions and markets that depend on it.

Retail payment systems are the networks that handle everyday transactions like bank transfers, card payments, and direct debits made by consumers and businesses. 

As opposed to RITS, which settles obligations between financial institutions, retail systems move money between individual account holders, typically in smaller amounts and through automated batch processes.

Here’s how these retail payment systems differ from RITS:

RITS in 1998 looked very different from what it is today. It has been shaped by the demands of the payments industry over the past 25 years.

Modernization

A recent change has been adopting ISO 20022. It’s a global messaging standard through which richer, more detailed payment information can travel alongside each transaction.

This way, payment processing can be smoother, fraud detection can be better, and it also puts Australia on the same page as other major financial systems around the world.

The RBA has also been working with the Bank for International Settlements (BIS) on exploring central bank digital currencies and linking Australia's fast payment system with those of other countries.

Improved liquidity tools

Over time, RITS has added better tools to help banks manage their liquidity throughout the day.

For instance, the introduction of open repos in 2013 increased the pool of system liquidity available early in the day. This allowed banks to settle payments faster, which in turn, reduced the risk of late-day challenges.

Higher payment volumes

When RTGS was launched in 1998, transaction volumes were a fraction of what they are today.

The launch of the NPP in February 2018 and the FSS that supports it further extended real-time settlement to everyday consumer payments. This expanded the volume of transactions flowing through the RITS infrastructure on a 24/7 basis.

Integration with other infrastructures

RITS has also deepened its connections with other financial market infrastructures like Austraclear, ASX Settlement, Property Exchange Australia (PEXA) for property transactions, and Continuous Linked Settlement (CLS) for foreign exchange. 

Each new integration has widened the reach of central bank money settlement into more corners of Australia's financial system, adding to the stability and coherence RITS aims for.

RITS is responsible for settling hundreds of billions of dollars every day, which means getting security and risk management right is everything. 

Which is why RITS is built around several layers of protection, each targeting a different type of risk.

Settlement finality

Every payment settled through RITS is permanent. Once the funds move across Exchange Settlement Accounts, the transaction cannot be reversed or unwound. 

This protection is backed by Australian law under the Payment Systems and Netting Act 1998, which means that even if a bank becomes insolvent on the same day a payment was made, that payment still stands.

This gives every participant in the system absolute certainty that a settled payment will not come back to haunt them.

Operational resilience

RITS runs on fully redundant infrastructure across two permanently staffed sites, with a third backup site available if needed. 

If the primary site goes down, the system can switch to the alternate site within 40 minutes for wholesale payments, and within 2 minutes for FSS transactions. 

The RBA tests these failover arrangements regularly, and all Payments Settlements Department staff are trained to work remotely if a wide-scale disruption occurs.

Liquidity monitoring

The RBA monitors payment flows and ESA balances across the system in real time, watching for any unusual patterns that might signal a bank is running into trouble.

If a potential issue is spotted, the RBA contacts the relevant institution directly.

Banks are also required to notify the RBA immediately if they experience any operational problem that affects their ability to make payments.

Cybersecurity

RITS is subject to annual external audits against the ISO 27001 information security standard, one of the most widely recognised benchmarks for information security management

Since RBA is a participant in the SWIFT network, it has to meet SWIFT's Customer Security Controls Framework, verified through an independent assessment each year.

Security policies are reviewed annually, and the RBA routinely commissions penetration tests and security reviews from external consultants to stay ahead of emerging threats.

In Australia, every large payment between banks, every bond settlement, and every foreign exchange transaction flows through RITS before completion.

What makes it so important is not just speed, but certainty. In high-value interbank settlement, there is no room for ambiguity. A payment either happened or it didn't. RITS makes sure the answer is always clear. 

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