Ever since someone brought up this system a while ago and confused it with a Real-Time Gross Settlement (RTGS) system https://news.ycombinator.com/item?id=48875605 , it has been bothering me that seemingly no one is talking about the real long-term cost of this "free system."

The history of payment systems is a history of risk. A quick primer,

All large-scale payment systems that interface with banks must have an answer for the inherent conflict between what the bank does (i.e. provide debt) and how it does it (by taking savings).

If the purpose of banks is to take capital from customers and use it to provide debt to others, then how much money should they keep for their customers' withdrawals and transfers?

If you do constant transfers back-and-forth 24x7 multiple times a second, then banks need a lot of capital at hand to manage the liability.

So even though gross settlement is supposed to be real-time, most RTGSes allow banks to borrow from their government's central bank via an "intra-day credit" system and then effectively net / settle at the end of the day, https://www.newyorkfed.org/research/epr/08v14n2/exesummary/e...

This loophole in a supposedly real-time system reduces the amount of money that banks "actually" owe each other. This allows banks to keep smaller reserves and provide greater amounts of capital to their customers.

You can see the different daily settlement points for the US here, https://www.federalreserve.gov/frrs/regulations/ii-federal-r...

But if you net only a few times a day, it creates risk. What if a bank becomes insolvent in between? Then it wouldn't be able to meet the obligations created by its customers, which would mean that other banks would fall short on their obligations and so on.

It's a network contagion effect; which is partly why the US Fed spent the better part of a decade studying counter-party risk in settlement systems before designing the latest version of its RTGS.

The Fed has protocols in place to stop such contagions before they start. Does the Indian government and its central bank? Where's the capital required going to come from? If a bank fails, who pays for its obligations? The Fed (currently) has a free infinite money glitch backed by the US Military, but the Indian government doesn't. So... where's that money going to come from?

Who is underwriting this system? Have they modelled systemic collapse? Because given what I've read about Indian banks and their bad debts, https://www.bbc.com/news/world-asia-india-58654740 it's a when not an if.

Cue a billion people panicking...