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Tuesday, 23 August 2016

Correspondent Banking


Correspondent Banking is the relationship between two banks which have mutual accounts with each other, or one of them having account with the other.

In other word, Correspondent Banking is a practice, where a bank is able to handle business in another city or country, through local bank (that is present at that city or county, which act as an agent of former and charging fees for the services.

Function of correspondent Banking:-

A.      Account Services

1.        To handling of outward payment, receipts of inward payments and collections, through the account maintained with it.

2.       As agent for collection of export/import bills as well as checks in their country

3.       Handle and executes all payment instruction of the client bank, by debiting to the account maintained with it.

4.       Also grant overdraft for temporary needs, say overnight o fill up short-term funding gaps.

5.       Offers services to investment of overnight surplus balance, investment of funds in short-term deposits, cash management services



B.      Other Services

1.       Letter of credit advising

2.       LC confirmations

3.       Bankers Acceptances

4.       Issuance of Guarantees

5.       Foreign exchange services

6.       Custodial services



BANK ACCOUNT


1.       NOSTRO account – “Our account with You”

2.       VOSTRO account – “Your account with Us”

3.       LORO account – “His account with Them”

4.       MIRROR account – Shadow of Nostro account . It is maintained in two currencies, one of which is the foreign currency and the other one is the home currency.




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